Hyderabad beats Bengaluru in new office supply in FY23

Hyderabad: Hyderabad outshone Bengaluru with the highest new office supply influx in the financial year (FY) 2023, indicates the latest research data released by property consultant, Anarock Private Limited. The report suggested that FY 2023 has been a mixed bag for the commercial office space market in the top seven cities, with the first half doing much better than the second.

In Hyderabad, 14.94 mn sft of new office space was infused in FY23, accounting for a 31 per cent share of the total supply in the top seven cities. The completion of office supply in the city was 27 per cent higher than in FY 2022. In contrast, Bengaluru saw around 12.66 mn sft of office supply completions, comprising a 26 per cent share and 13 per cent lower than the previous fiscal.

Prashant Thakur, Head – Research, Anarock Group, said: “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.”

In terms of the average annual vacancy rates in average Grade A office, Hyderabad alone saw a notable increase of 0.5 per cent. The remaining six cities experienced a decline in vacancy levels ranging from 0.1 per cent to 0.5 per cent. Among them, the most significant decrease was in MMR, with a drop of 0.5 per cent. Kolkata followed with a decrease of 0.4 per cent, and Pune with a decrease of 0.2 per cent. Bengaluru, Chennai, and NCR each witnessed a modest decline of 0.1 per cent compared to the vacancy levels in FY2021-22.

Thakur further said that the Indian economy is stronger than most developed nations, but the future bears watching. “The current 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,” he added.

Leading the pack with the highest y-o-y increase in average office rental values were Pune and Bengaluru, with growth rates of 10 per cent and 9 per cent, respectively. Hyderabad came next with a gain of 7 per cent.