Hyderabad: Hyderabad to witness oversupply of 40 million sq ft office space by 2025

Hyderabad is poised for a remarkable surge in Grade A office space by 2025, surpassing major hubs like Bangalore, Chennai, Delhi-NCR, and Mumbai, according to a report by Prop Share and JLL.

Till the end of 2025, 40 mn sf of Grade A supply is expected to be added in Hyderabad increasing the city’s supply to 148 mn sf (37% increase). The increase in supply is predominantly in the Gachibowli micro-market due to the availability of land, mentioned the report.

“There is a short term concern but the Hyderabad market has performed very well last year. We expect around 9-10 mn sq ft of absorption annually in the city with smaller deals picking up and global captive centers looking at alternative space in Hyderabad apart from Bangalore market,” said Bhaskar Raju, MD, the Bengaluru-based DivyaSree Developers.

Leading contributors to this surge include Mindspace, Divyashree, Phoenix, GAR Infobahn , and CapitaLand. Separately, other developers like Phoenix, Salarpuria Sattva, and RMZ will play a pivotal role in the supply boost in HITECH City.

Kunal Moktan, CEO of Prop Share said that the increase in office supply provides companies with options to optimize operations amid the current global economic climate with vacancies across the 4 markets have gone up marginally. “Vacancy has increased largely because of the slowdown in MNC expansion across most markets, however, in Hyderabad the city-wide vacancy has increased from 21% to 24%. A comfortable level of vacancy would be around 15%. There will be pockets in each city where vacancy and upcoming supply is more favourable than the rest of the cities,” he said.

Since 2019, the escalating demand has translated into a substantial supply surge, with Hyderabad securing position among the top three cities dominating office space leasing. In 2023 over 6 million sq ft office space was leased in Hyderabad. “The demand will improve in pockets like Madhapur but areas like Gachibowli and Kokapet will see some challenges in terms of absorptions. We will see flat rentals in Gavhibowli in the coming quarters too in Hyderabad due to oversupply,” said Thirumal Govindraj CEO(office) RMZ Corp. According to the report, given the relatively lower vacancies in Bangalore (14%) and Pune (12%), the supply addition here is not too much of a concern, however, certain micro-markets within these cities may see a spurt in vacancy due to the increased supply levels.

“ Hyderabad’s supply growth, on the other hand, is concerning given that the vacancy is already at around 24% despite the high asset quality in the city,”mentioned the report.

“Hyderabad’s high office supply has provided occupiers with high-quality options to consolidate and re-strategise their portfolios; this is particularly appealing in the current global economic climate when many companies are optimising their operations,” said Moktam.

Over the years, Hyderabad has expanded to the west from the old CBD areas of Jubilee Hills to HITEC City and Gachibowli. Strong infrastructural support from the Telangana government led to the emergence of HITEC City as one of India’s leading IT corridors attracting multinational tenants like Qualcomm, JP Morgan, Google and Microsoft.

The city’s unlimited Floor Space Index (FSI) norm and robust government support for infrastructure along with the strategic emphasis on outsourcing, back offices, R&D facilities, and regional headquarters has fueled the rising demand, particularly along the IT Corridor and Extended IT Corridor.