Office Mkt Absorption In Hyd Climbs 7% To 7.5 Million Sft In 2024

The rise in vacancy rates can be attributed to several factors - new supply addition of 43.4 million sft during 2022-24, cautious expansion strategies by IT-ITeS firms -- Peush Jain, Managing Director - Commercial Leasing, Anarock Group

Hyderabad: The office market in the city registered an absorption of 7.5 million sft led by Grade-A micro-markets like Hitec City and Banjara Hills, a report said.

Hyderabad witnessed a moderate office space absorption of seven per cent year-on-year growth compared to 7.01 million sft in 2023. Grade-A micro-markets like Hitec City and Banjara Hills experienced six per cent and five per cent increase on annual basis, according to Anarock’s latest report, India Office Market Update CY 2024.

The city maintained steady rental growth, with average office rents increasing by five per cent year-on-year to reach Rs 67/sft/month, reflecting a substantial 20 per cent growth since 2019. The market witnessed evolving sectoral dynamics, with IT-ITeS maintaining dominance despite a two per cent contraction to 40 per cent of total office transactions in 2024. BFSI and Co-working sectors each expanded their footprint by two per cent, reaching 23 per cent and 18 per cent respectively.

However, the city faced supply-side pressures with new office supply declining four per cent year-on-year to 12.9 million sft, compared to 13.4 million sft in 2023. The supply-demand imbalance due to new supply surpassing the net absorption of office spaces resulted in record-high average vacancy rate of 26.5 per cent - the highest among the top seven cities, the report mentioned.

Peush Jain, Managing Director - Commercial Leasing, Anarock Group, said: “The rise in vacancy rates can be attributed to several factors - new supply addition of 43.4 million sft during 2022-24, cautious expansion strategies by IT-ITeS firms amid global economic uncertainties, and the maturation of the market with enhanced focus on grade-A properties.”

Despite these challenges, Hyderabad’s office market fundamentals remained robust, supported by steady rental appreciation, growing sectoral diversification, and consistent absorption levels, positioning it as a key commercial real estate destination in India, Jain added.

According to the report, the National Capital Region (NCR) office market recorded a 61 per cent year-on-year increase in net absorption, the highest among the top seven cities, to reach 9.5 million sft in 2024 primarily driven by robust demand from GCCs and the technology sector.