NEW DELHI: The occupancy in Grade A office spaces in Hyderabad is expected to compress to around 75.5-76% by March 2026 from ~86% as of March 2023, as supply is expected to significantly outpace net absorption, according to ICRA.
Office supply grew at a higher compound annual growth rate (CAGR) of ~14% during FY 2017 to FY 2024 for the Hyderabad market, compared to a compound annual growth rate (CAGR) of ~7% for the six office markets in the country.
Hyderabad accounts for around 15% of total available office supply from the six markets as on March 31, 2024, which ICRA expects would rise to 17% by March 2026.
Anupama Reddy, vice president and co-group head, corporate ratings, ICRA said, “Hyderabad witnessed an all-time high supply of ~19 million sq ft in FY24. This high supply trend is expected to continue through FY25 and FY26 with estimated new supply of 17-20 million sq ft each year. However, net absorption is expected to remain in the range of 9-12 million sq ft each year, resulting in a steep increase in vacancy levels to 24-24.5% by March 2026 from 14.1% as of March 2023 (19.3% as of September 2024).”
ICRA estimates the city to have the highest vacancy levels by March 2026 among India’s top six cities, surpassing Delhi NCR.
Peush Jain, MD-Commercial Leasing and Advisory, Anarock Group said, “The rise in supply of office spaces in Hyderabad is on account of the growing interest from the GCCs and domestic companies. The IT/ITes, BFSI and flex spaces have been the key drivers of demand in the city and with growing corporate activity and economic uptick, the city has the potential to absorb the excess supply. The rising vacancies may not be a cause of concern as Grade A offices with focus on sustainability and technology will not just attract occupiers but also command premium rentals.”
The North-west Region in Hyderabad accounts for 88-89% of total grade-A office space as on September 30, 2024.
Hitech City, Gachibowli and Financial District are the top three micro-markets, which account for 70% of the total office supply.
The vacancy levels are expected to remain stable in Hitech City (9.5-10.0%) as it remains the preferred office location for tenants.
Vacancy levels are expected to shoot up significantly to 25-30% for Gachibowli and Financial District by March 2026 as 60% of the upcoming supply in FY2026 is getting added in these two micro markets, resulting in supply outpacing net absorption.
