Bangalore saw approx. Office supplies completed 12.66 million square feet, a 26 percent share, 13 percent lower than the previous fiscal year.
UPDATE – Mon 05 Jun 23 11:45 AM
Hyderabad: Hyderabad outpaced Bengaluru in the influx of new office supply in the 23rd fiscal year (FY23), according to the latest research data from real estate services firm ANAROCK. ANAROCK reported that a total of 14.94 million sq ft (million sq ft) of new office space was injected into Hyderabad in FY23, accounting for 31% of the total supply in the top 7 cities.
Office supply completions in Hyderabad are 27% higher than FY2022. In comparison, Bengaluru’s completion was approx. Office supplies completed 12.66 million square feet, a 26 percent share, 13 percent lower than the previous fiscal year.
NCR is not far behind. 8.82 million square feet of office space completed in FY23 – a 52% annual increase. MMR (Mumbai) completed just 4.18 million sq ft of new office supply in FY23, down 46% from the previous financial year.
Prashant Thakur, Senior Director and Head (Research), ANAROCK Group, said: “The strong growth in the office real estate market in the first half of FY2023 was short-lived. The slowdown in major global economies cast a pall over the second half of the year for the Indian office market. This This trend is likely to continue in the near future. Major headwinds including corporate layoffs and global recessionary trends will continue to impact the growth of office space in India.”
“Right now, the Indian economy is stronger than most developed countries, but the future is something to watch,” Thakur said. “The current sluggish Indian office market may not improve until the first half of 2024. Many IT/ITeS companies have scaled back their operations and are not planning to expand. Hence, the top 7 for the remaining months of 2023 and early 2024 The city’s office market will remain subdued. We expect some stabilization in the second half of 2024, depending on the global economy.”
A silver lining – falling vacancy rates
Despite company layoffs and limited expansion in 2H, the average Grade A office vacancy rate in the top 7 cities fell by 0.1% YoY – from 16% in FY22 to a slightly better 15.9% in FY23. Pune is the only city with an office vacancy rate hovering in single digits at 8.3%. Chennai followed with a vacancy rate of 10.27%, while Bengaluru had a vacancy rate of 11.15%, making these cities the lowest office space vacancy rates among the top seven cities for the first fiscal year.
In terms of average annual vacancy rates in these cities, Hyderabad alone has seen a notable increase of 0.5%. The vacancy rate of the remaining 6 cities decreased by 0.1% to 0.5%. Among them, the biggest drop was in MMR, with a drop of 0.5%. Kolkata followed with a 0.4 per cent drop and Pune 0.2 per cent. Bengaluru, Chennai and NCR all saw modest declines of 0.1 per cent compared to vacancy levels in FY2021-22.
Office rents increased by 4% year-on-year
Average office rents in India’s top seven office markets have grown by 4% annually. In FY22-23, the average rent of Grade A office buildings across India reached INR 79/sqft/month – an increase of 4% from FY22. This upward trend is mainly attributable to rising input costs.
Among the top 7 office markets, MMR maintained its position as the most expensive office leasing market, with rents soaring to INR 132/sqft/month. Bengaluru follows at INR 85/sqft/month and NCR comes in third with an average rent of INR 82/sqft/month. Kolkata, on the other hand, had the lowest average office rent this financial year at INR 54/sqft/month.
