Hyderabad recorded the highest new office supply influx of 14.94 million square feet, accounting for 31 per cent of the share of the total supply in the top seven cities, according to data from ANAROCK.

Office supply completions in the city were 27 per cent higher than in FY22. In contrast, Bengaluru saw about 12.66 million square feet of office supply completions, accounting for 26 per cent share and 13 per cent lower than the previous fiscal.

In NCR, 8.82 million sq. ft. of office space was completed in FY23, up 52 per cent annually. In MMR, 4.18 million sq. ft. of new office supplies were completed in FY23, down 46 per cent from the previous fiscal year.

However, net office absorption was highest in Bengaluru at 9.88 m sq. ft., NCR at 6.89 m sq. ft. and Hyderabad at 6.88 m sq. ft.

“The global slowdown in major economies around 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 corporations and global recessionary trends, will continue to mar office space growth in India,” said Prashant Thakur, Sr. Director and Head of Research, ANAROCK Group.

Drop in Vacancy Levels

Average Grade A office vacancy levels in the top seven cities witnessed a 0.1 per cent y-o-y decline despite layoffs and restricted expansion of companies in the second half, from 16 per cent in FY22 to a marginally better 15.9 per cent in FY23. While Pune had 8.3 per cent, Chennai had 10.27 per cent and Bengaluru had 11.15 per cent.

In terms of the average annual vacancy rates in these cities, Hyderabad 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.

Office Rentals

In 2022–23, the average rentals of Grade A office spaces across India reached ₹79/sf/month, a 4 per cent increase over FY22. This upward trend can be attributed 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 ₹132/sf/month. Bengaluru followed at ₹85/sf/month, and NCR came in third with rentals averaging at ₹82/sf/month. On the other end of the spectrum, Kolkata had the lowest average office rentals in the current fiscal year, at ₹54/sf/month.

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 y-o-y gain of 7 per cent, and both MMR and NCR saw a 5 per cent increase each. Kolkata witnessed a 4 per cent rise, and Chennai saw a steady 3 per cent growth in average office rentals compared to the preceding financial year.

“The currently depressed Indian office market may not improve till the first half of 2024. Many IT/ITeS companies have scaled down their businesses 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 in the second half of 2024, depending on how the global economy shapes up.”