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Hyderabad Office Space Supply Increases as Offices Become Vacant Again

Posted by luckypropertywala_sxyoj4 on January 28, 2022
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Hyderabad’s office space already has a pretty high 12-15% vacant space of the total office space available in the city, but the 3rd wave of the Covid-19 pandemic due to the Omicron variant could see the vacant workspace in Hyderabad increase further. As corporate offices have resorted to work-from-home or hybrid work culture, office spaces are being vacated again, at least for the near future over the next 3-4 months. There has also been a huge influx of office space to Hyderabad’s commercial sector which will only drive the vacancy percentage number even higher.

The supply of new office spaces in Hyderabad during 2021 was a record high with more than 1.1 crore sq. ft. added to the inventory which is the highest addition for any year in the city. The office space added in Hyderabad during 2021 was an increase of around 50% more than the office space added during 2020. According to market forecasts, the expected addition of office space to Hyderabad’s commercial realty sector for 2022 is expected to be anywhere between 1.5 – 2 crore sq. ft. which will further increase vacancy numbers if offices remain at current occupancy levels.

Data from real-estate services/consultancy firms indicate that this trend of vacancy of office spaces increasing is not uniform across all commercial areas of Hyderabad as the addition of new vacant office space is mainly due to new projects coming up in areas like Gachibowli, Kokapet, Nanakramguda, Madhapur – areas concentrated around the IT/ITeS hubs of the city. The market was expecting office space consumption & occupancy to increase towards the end of 2021 but the emergence of Omicron variant has caused stagnation of the commercial workspace market.

As the situation improves, market experts believe the vacancy rates will stabilise to pre-COVID-19 levels when offices slowly start returning to work-from-office culture. Data for the years 2016-2019 shows the vacancy in office space in areas like Gachibowli was around 4% as more & more IT/ITeS companies made investments in workspaces along the western corridor of Hyderabad. The dynamic absorption rate in the city ensured that the vacancy percentage was always between 4-8% before the Covid-19 pandemic.

A significant and strong office space consumption recovery was witnessed post the second wave of the pandemic which gives room for optimism & a bright outlook for the commercial realty sector which is expected to recover faster than the last time and the momentum is expected to continue growth of the office space sector into 2023. Investment attractiveness due to solid infrastructure and the speed of growth in Hyderabad is also an added bonus which will draw investors to absorb more commercial space in the city.

Hyderabad was the highest real-estate market amongst India’s top 7 cities for institutional investments and the commercial sector had a 30% share in institutional investments in the city. Many pharma giants are also investing in the city’s real-estate to set up offices, research & development bases and manufacturing hubs meaning the net commercial space absorption in the city will be on the rise over the next few years and a lot of office space will be added.

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