Hyderabad Beats Bengaluru with highest new office supply in FY23, Anarock report

Bengaluru saw approx. 12.66 Mn sq. ft. of office supply completions, comprising a 26 percent share and 13 percent lower than the previous fiscal.

Hyderabad: Hyderabad has outshone Bengaluru with the highest new office supply influx in financial year-23 (FY23), according to the latest research data from real estate services company Anarock. A total of 14.94 Mn sq. ft. (million square feet) new office space was infused into Hyderabad in FY23, accounting for a 31 percent share of the total supply in the top 7 cities, the Anarock report said.

Office supply completions in Hyderabad were 27 percent higher than in FY 2022. In contrast, Bengaluru saw approx. 12.66 Mn sq. ft. of office supply completions, comprising a 26 percent share and 13 percent lower than the previous fiscal.

---

NCR was close behind with approx. 8.82 Mn sq. ft. office space completed in FY23 – up by 52 percent annually. MMR (Mumbai) saw a mere 4.18 Mn sq. ft. of new office supply completed in FY23, down by 46 percent from the previous fiscal year.

Prashant Thakur, Senior Director and Head, (Research), Anarock Group, says, “The robust growth seen in the office real estate market in the first half of FY 2023 was short-lived. The global slowdown in major economies of the world cast a shadow on the Indian office market in the second half. This trend is likely to continue in the near future. Major headwinds including layoffs by corporates and global recessionary trends will continue to mar office space growth in India.”

“Currently, the Indian economy is stronger than most developed nations, but the future bears watching,” says Thakur. “The currently depressed Indian office market may not improve till the first half of 2024. Many IT/ITeS companies have scaled down their business and are not looking to expand. Office markets across the top 7 cities will thus remain muted in the remaining months of 2023 and early 2024. We expect some stability from the second half of 2024, depending on how the global economy shapes up.”

Silver Lining – Drop in Vacancy Levels

Average Grade A office vacancy levels in the top 7 cities witnessed a 0.1 percent Y-o-Y decline despite layoffs and restricted expansion of companies in the second half – from percent in FY22 to a marginally better 15.9 percent in FY23. Pune is the only city where office vacancy hovers in the single digits at 8.3 percent. Chennai follows with a vacancy rate of 10.27 percent, while Bengaluru registered a vacancy rate of 11.15 percent – making these the cities with the lowest office space vacancy among the top 7 cities in the current fiscal year.

In terms of the average annual vacancy rates in these cities, Hyderabad alone saw a notable increase of 0.5 percent . The remaining 6 cities experienced a decline in vacancy levels ranging from 0.1 percent to 0.5 percent . Among them, the most significant decrease was in MMR, with a drop of 0.5 percent. Kolkata followed with a decrease of 0.4 percent, and Pune with a decrease of 0.2 percent. Bengaluru, Chennai, and NCR each witnessed a modest decline of 0.1 percent compared to the vacancy levels in FY 2021-22.

Office Rentals see 4 percent y-o-y Surge

India’s top 7 office markets witnessed a decent 4 percent yearly increase in average office rentals. In the fiscal year 2022-23, the average rentals of Grade A office spaces pan India reached INR 79/sf/month – a 4 percent increase over FY22. This upward trend can be attributed largely to the escalation in input costs.

Among the top 7 office markets, MMR maintained its position as the most expensive office rental market, with rentals soaring to INR 132/sf/month. Bengaluru followed at INR 85/sf/month, and NCR came third with rentals averaging at INR 82/sf/month. On the other end of the spectrum, Kolkata had the lowest average office rentals in the current fiscal, with INR 54/sf/month.