Hyderabad outshone Bengaluru with the highest new office supply in fiscal 2023 with almost 14.94 million square feet of office space getting added and accounting for a 31 percent share of the total supply in the top seven cities, according to a report by Anarock Research.
Office supply completions in Hyderabad were 27 percent higher than in FY22. In contrast, Bengaluru saw approximately 12.66 mn sq ft of office supply completions, about 13 percent lower than the last fiscal. Bengaluru had a 26 percent share in total supply in top metros.
NCR was close behind with around 8.82 mn sq ft office space completed in FY23 – up by 52 percent annually. MMR saw a mere 4.18 mn sq ft of new office supply completed in FY23 – down 46 percent from the previous fiscal.
Office space absorption
Net office absorption was highest in Bengaluru (approximately 9.88 mn sq ft), followed by NCR and Hyderabad with approximately 6.89 mn sq ft and 6.88 mn sq ft, respectively.
In fiscal 2023, the average monthly rentals of Grade A office spaces pan-India reached Rs 79/sf – a 4 percent increase over FY22. This upward trend can be attributed largely to the escalation in input costs.
MMR maintained its position as the most expensive office rental market, with monthly rentals soaring to Rs 132/sf. Bengaluru followed at Rs 85/sf, and NCR came third with rentals averaging at Rs 82/sf. On the other end of the spectrum, Kolkata had the lowest average office rentals in the current fiscal, with Rs 54/sf.
Leading the pack with the highest year-on-year (yoy) increase in average office rental values were Pune and Bengaluru, with growth rates of 10 percent and 9 percent respectively. Hyderabad came next with a 7 percent yoy gain, and both MMR and NCR saw a 5 percent increase each.
Dim outlook
“The robust growth seen in the office real estate market in the first half of FY23 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,” said Prashant Thakur, senior director and head – Research, Anarock Group.
The currently 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 seven 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 said.