Hyderabad beats Bengaluru in net office space absorption

Hyderabad: In contrast to previous fiscal years, Hyderabad surpassed Bengaluru to become the most favoured office market by the occupiers in financial year 2021-22, accounting for 23 per cent of the overall net office absorption, followed by 22 per cent in Bengaluru and 15 per cent in Delhi -NCR. Kolkata has the lowest share of net office absorption with 2 per cent share as per the latest report by Anarock Research.

According to the report, a total of 34.1 million sft of net office space was leased across the top 7 cities in FY22, a rise by 60 per cent as compared to FY21. Three major cities in south India – Bengaluru, Hyderabad and Chennai - dominated India's office market with the contribution of 54 per cent (around 18.35 million sft) of the total demand.

Mumbai and Pune - absorbed 29 per cent of the total office space (around 9.8 million sft) and the northern region NCR at 15 per cent share. The remarkable growth in the office market of these three southern cities when viewed against their western and northern counterparts is directly attributable to robust demand by the IT/ITeS sector, affordable rentals, and the exponential growth of startups locally. Given the significantly high completions in the current fiscal, the average vacancy rate of office spaces across the top 7 cities rose from 15 per cent in FY21 to 16 per cent in FY22. This is mainly due to the steady pipeline of office spaces entering the market, thereby widening the gap between demand and supply. At 28.5 per cent, NCR has the highest office space vacancy amongst the top 7 cities.

Post the pandemic, co-working was expected to be no more. Like many others, this prediction was baseless - the 'new normal' has caused co-working spaces to emerge as one of the best options for adopting a hybrid model at offices. Anarock report reveals that out of the total net absorption of 34.1 million sft across the top 7 cities in FY 2021-22, coworking comprised a 13 per cent share.

In FY21, its share was just 5 per cent of a net absorption (of 21.32 million sft) - an 8 per cent growth in its total share. This is the highest growth rate among all office segments. At about 4 per cent, the manufacturing / industrial sectors registered the second highest YoY growth in net office absorption in FY22. The share of IT/ITeS and e-commerce sectors declined by 8 per cent and 6 per cent respectively.