Notwithstanding President Trump
City: 
IT cities like Hyderabad and Bangalore continue to outdo non-IT cities in office absorption space this year

Real estate developers in Hyderabad are counting their blessings. Reason? The rate at which the IT-ITES office-space market is being taken up in the city, is very good news for them.

According to latest data from JLL India, the global real estate services firm sp­ecialising in commercial property and investment ma­­­nagement, the office space take-up in Hyderabad in the second quarter of 2017 saw almost double the numbers seen in the same quarter last year. At approximately 1.9 million sq ft, Hyderabad saw 98 per cent of the second quarter of 20­16 absorption this quarter.

But the overall realty market in this city of sultans is battling its own demons. The recent political tumult of Hyderabad is finally stabalising, but with the clouds of global financial crises hovering around, the city’s office-space market is acutely aware of the pitfalls.

The expanding office space market has found a niche for itself in Hyderabad and has numbers, which could threaten the dominance of Bengaluru’s premier position as occupier of office market space.

On the macro scale, the all India office space absorption is down by 1 per cent for the second quarter. Total office space absorption in this year’s second quarter was 7.9 million sq ft as compared with 8 million sq ft the year before.

The reason for the overall absorption being lower is lower supply hitting the market. The big IT companies prefer a lesser number of big-ticket office leasing transactions, as was evident in this quarter.

In comparison to the first half of last year, supply in the first half of 2017 was also lower by 50 per cent.

But even with all the possible disruptions, Hyderabad is determined to see the highest office addition spaces by 2020. While Bangalore stands at 130 million sq ft, Hyderabad’s office space availability is pegged at 45 million sq ft.

Importantly, in next 2-3 years, Hyderabad is expected to add 38 million sq ft of office space, predicts the JLL report. At approximately 1.7 million sq ft, Bengaluru is marginally ahead of last year’s figure.

The queen of Deccan, Pune saw its net absorption in the second quarter this year declining by 37 per cent when compared to last year. The reason for such a drop in Pune is the city facing a supply crunch of quality office space.

In comparison to other major cities of India, Hyderabad is doing rather nicely. Delhi-NCR saw a decline of 22 per cent (Y-o-y), but more than 60 per cent of Delhi’s office space was occupied by IT companies.

Chennai saw the highest decline of 47 per cent followed by Mumbai at 29 per cent. Interestingly, Kolkata saw 189 per cent increase in absorption, but on a lower base than any other city.

Trump Effect?

As promised during the course of his election campaign, in an effort to increase jobs for fellow Americans, Donald Trump whipped out ‘The Protect and Grow American Jobs Act’. This Act is an executive order, which proposes important changes in the eligibility requirements for H1-B visa applications.

The Act advocates an increase in minimum wage to $130,000, which is more than double of the present limit of $60,000. The change ensures that the H1B programme is used only to complement American workers.

With such an order in place, IT companies in the US are making significant changes in their hiring policies. Companies are expected to make a sizeable reduction of employees under the H1-B visa programme. This is most likely to play out by hiring local talent in the US.

But the caveat is that the US invites 65,000 people under the H1-B programme. This forms only 0.0004 per cent of the 160-million strong American workforce.

What should be the major concern for the US is the unemployment rate among skilled workers. The small number at around 2 per cent, points towards a shortage of skilled talent in the US.Therefore, the impact of US’s new Act on IT jobs in India will be marginal. While Trump and his policies pose less threat to the IT sphere, the bigger impact is expected from the automation and artificial intelligence.

Newer technologies like cloud computing and big data is likely to create more new jobs. What will decide Indian IT firm’s growth trajectory is their ability to re-skill their employees for such newer opportunities, which in turn would determine the quantum of office space that is required.

anirban.halder@mydigitalfc.com