Hyderabad takes lead in office space supply growth

The report indicates a promising future for the real estate market in India, driven by the positive outlook of developers.

Hyderabad: Hyderabad is emerging as the second spot after Bengaluru for upcoming office space supply in India, according to a report by CBRE South Asia Pvt. Ltd.

The report, titled ‘Office Space Revolution,’ reveals that office supply completions across the country’s top seven cities are projected to exceed a staggering 165 million square feet between 2023 and 2025, marking a substantial increase from the 142 million square feet recorded during the 2020-2022 period.

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The report indicates a promising future for the real estate market in India, driven by the positive outlook of developers.

Hyderabad and Bengaluru are poised to dominate this wave of new office space supply, accounting for nearly half of the total supply in the upcoming years.

According to the report, between 2023 and 2025, Bengaluru will lead the office space supply race, accounting for 29 per cent of the total supply in India, followed closely by Hyderabad at 20 per cent, Delhi-NCR at 17 per cent, Pune at 12 per cent, Chennai at 11 per cent, Mumbai at 9 per cent, and Kolkata at 2 per cent.

The report further reveals the specific areas where new office developments will be concentrated. In Hyderabad, the IT Corridor II and Extended IT Corridor will see the most significant completions.

Anshuman Magazine, Chairman & CEO of CBRE India, South-East Asia, Middle East & Africa, commented on the robust growth of the Indian office sector. He noted that the country’s substantial supply completions indicate a positive outlook for the industry, with average annual office supply increasing by 17 per cent and average building size by 18 per cent from 2020 to 2022. The growth is projected to accelerate further by 15-18 per cent from 2023 to 2025, driven by strengthening occupier demand and developers’ expansion plans. India is expected to remain a key global destination for setting up Global Capability Centres (GCCs) across various sectors, thanks to its cost and scale advantages.

Ram Chandnani, Managing Director of Advisory & Transactions Services at CBRE India, highlighted that India continues to be an attractive investment destination in the Asia Pacific region for North American and European investors. In 2022, foreign investment in India increased by a substantial 80 per cent year-on-year, reaching USD 2.8 billion, making it the only market in the entire APAC region to witness annual growth in capital deployment.

Despite prevailing economic conditions, IT expenditure in India is expected to remain robust throughout 2023. This resilience is attributed to corporations’ continued focus on enhancing employee productivity, improving customer experiences, and optimizing operations. Notably, the demand for office space is primarily driven by BFSI, technology, and pharmaceutical companies, accounting for approximately 50 per cent of leasing activity in Jan-Sep 2023, with expectations of sustained leasing activity in the long term.

The report also highlights a positive trend in hiring in India, with a significant upswing in 2022, witnessing a moderate increase in total jobs compared to the previous year. It projects continued growth in the annual employment rate for office-going professionals in the six major cities, forecasting an 11 per cent increase in 2023. This indicates a promising outlook for the country’s job market and employment opportunities, reflecting increased economic activity and demand for talent.

New office space completions by 2025 are expected to break down as follows:

Hyderabad: 20% contributing to 33 million sq. ft.

Bangalore: 29% contributing to 47.8 million sq. ft.

Delhi NCR: 17% contributing to 28 million sq. ft.

Pune: 12% contributing to 19.8 million sq. ft.

Chennai: 11% contributing to 18.15 million sq. ft.

Mumbai: 9% contributing to 14.8 million sq. ft.

Kolkata: 2% contributing to 3.3 million sq. ft.