Hyderabad sees sharp rise in office space leasing
Witnesses highest growth in absorption as well as new supply of Grade-A office stock, says Colliers report
Hyderabad has witnessed sharp increase in demand for gross leasing of office space during July-September quarter (Q2) of FY 2023-24. The city has witnessed the highest growth in absorption as well as new supply of Grade-A office stock across six major cities, according to the recent report of real estate consultant Colliers India.
The Grade A office space gross absorption in the city has surged up 138 per cent to 2.5 million sq ft in Q2 FY24 against 1 million sq ft in same quarter last fiscal.
Similarly, Hyderabad has witnessed significant new completions, contributing to 37 per cent of the total new supply across six major cities. The new supply of Grade A office stock has grown 347 per cent at 6.75 million sq ft in Q2 FY24 over 1.5 million sq ft in the corresponding quarter a year ago.
The gross absorption of office space across six major cities rose 2 per cent to 13.2 million sq ft during Q2 FY 24 when compared to 12.9 million sq ft in the year-ago period. Gross absorption does not include lease renewals, pre-commitments and deals where only a letter of intent has been signed.
Colliers India on Friday released the data of key office markets for the third quarter of 2023 calendar year, showing that the demand increased in four cities - Mumbai, Pune, Hyderabad and Chennai - but decreased in Bengaluru and Delhi-NCR.
As per the data, the gross office space leasing in Bengaluru declined to 3.4 million sq ft during July-September from 4.4 million sq ft in the year-ago period. Delhi-NCR market too saw a fall in leasing to 3.2 million sq ft from 4.3 million sq ft.
On the positive side, the leasing of office space in Hyderabad jumped 2.5-fold to 2.5 million sq ft from 1 million sq ft. In Mumbai, the absorption of office rose marginally to 1.7 million sq ft from 1.6 million sq ft.
The gross leasing of office space in Chennai grew to 1.4 million sq ft from 1 million sq ft. In Pune, the absorption of office space increased to 1 million sq ft from 0.6 million sq ft.
Although technology sector continues to drive the demand with a 25 per cent share in the gross leasing, demand is now more broad-based spanning across sectors. The shares of flex spaces, engineering & manufacturing and BFSI sectors have seen significant sectoral gains by up to 6 percentage points (pp) each. Flex spaces, especially, continue to perform well in 2023, as occupiers continued to prefer dynamic working arrangements for their portfolios. Overall, Bengaluru and Delhi NCR were the most preferred locations for flex players for their expansion.
“Contrary to earlier belief, India office demand for the first three quarters of 2023 has followed an overall trajectory almost similar to 2022. With strong domestic macro-economic indicators backing the demand of office space, the momentum is likely to continue in the last quarter of the year. It would be interesting to see if 2023 could breach the historic high leasing activity of 2022.” says Peush Jain, MD, Office services, India, Colliers.
“Despite externalities, fundamentals of India office market remain strong, and 2023 activity has been at par with 2022. While there is a healthy supply pipeline for the next few years, developers have been cautious of infusing supply in tandem with market demand dynamics. Vacancy levels since 2022 have been in the range of 15-20 per cent across most cities, signaling stability in occupancy levels. Return to office mandates, despite increased preference for hybrid working augurs well for the near-term office space demand. Consequentially, rentals are likely to remain firm across key micro markets,” says Vimal Nadar, Senior Director and Head of Research, Colliers India.
