Hyderabad leads the office space market with the highest new office supply in FY23. With 14.94 million square feet of new office supply, Hyderabad grew by 27% and had a 31% share of the total supply in the top seven cities. Bengaluru was second with the completion of 12.66 million square feet with a 26% share but a decline of 13% from the previous fiscal.
The Mumbai Metropolitan Region saw a 46% decline in new office supply in FY23 to 4.18 million square feet. Bengaluru leads the market when it comes to net absorption at 9.88 million square feet, followed by NCR at 6.89 million square feet and Hyderabad with 6.88 million square feet.
“FY23 has been a mixed bag for the commercial office space market in the top seven cities, with the first half doing much better than the second,” Anarock Research data said.
Total new completion in the country declined by 4.95% to 48.662 million square feet in FY23 compared to 51.2 million square feet in FY22.
Anarock said the silver lining in the Indian office market was the drop in vacancy levels despite layoffs and restricted expansion of companies in the second half.
Net office absorption was up 6.10% in FY23 to 36.114 million square feet from 34.06 million square feet last fiscal. The country’s office vacancy rate in FY23 saw a 0.1% year-on-year decline, reflecting improved occupancy. Pune is the only city where office vacancy hovered in the single digits at 8.3%.
The average office rentals in the top seven office markets also witnessed a 4% yearly jump in FY23 but Pune rentals surged by 10% and Bengaluru saw an increase of 9% followed by Hyderabad which saw a y-o-y gain of 7% in office rentals.
Prashant Thakur, senior director and head — research, Anarock Group, said the global slowdown in major economies of the world cast a shadow on the Indian office market in the second half. Major headwinds, including layoffs by corporates and global recessionary trends will continue to mar office space growth in India, Thakur said.
“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 7 cities will thus remain muted in the remaining months of 2023 and early 2024,” Thakur said.
The average rentals of Grade A office spaces pan India in FY23 rose by 4% to Rs 79 per square feet. MMR remained the most expensive office rental market, with rentals soaring to Rs 132 per square feet, followed by Bengaluru at `85 per square feet per month. Kolkata had the lowest average office rentals in the current fiscal at `54 per square feet per month.