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Updated January 15th, 2024 at 17:43 IST

Hyderabad's office space surge: Opportunity or overload? A look at supply trends

HITEC City dominates Hyderabad's office market with 61%, closely followed by Gachibowli at 29%, amid a supply surge since 2019 expected to persist until 2025.

Business Desk
Office buildings
Office buildings | Image:Pixabay
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Hyderabad's IT rise: Over the years, Hyderabad has witnessed an expansion, shifting from the traditional CBD areas to emerging IT corridors like HITEC City and Gachibowli. The support from the state government has transformed HITEC City into a hub for multinational giants such as Qualcomm, JP Morgan, Google, and Microsoft, according to a report by Property Share.

Micro-market dynamics

The report highlights two key micro-markets in Hyderabad – HITEC City and Gachibowli. While HITEC City dominates with 61 per cent of the stock, Gachibowli follows closely with 29 per cent. Notably, there's a surge in annual supply addition since 2019, expected to continue until 2025.

HITEC City, nearing saturation, anticipates newer expansions predominantly in Gachibowli, driven by available land and the unlimited FSI policy unique to Telangana. With a steady supply of approximately 10.5 million sq ft  in HITEC City, moderate rental growth is expected, creating a favourable environment for commercial real estate investors.

Gachibowli, an emerging market in Hyderabad, boasts a robust supply pipeline of 24.1 million sq ft until 2025, signalling a 73 per cent increase in stock. However, higher expected vacancy levels and flat rentals suggest a cautious approach for investors.

For commercial real estate investors eyeing Hyderabad, experts suggest focusing on pre-leased office opportunities in institutional quality buildings in HITEC City. Long lock-ins or tenants who have completed fitouts provide stability in this evolving market.

Future projections

By the end of 2025, Hyderabad is set to witness the addition of 40 million sq ft of Grade A supply, marking a 37 per cent increase and bringing the city's total supply to 148 million sq ft. However, the report highlights a rise in vacancy rates to 24 per cent by H2 2023, up from 15 per cent in 2021, primarily due to the influx of supply in anticipation of absorption levels seen in 2019.

According to experts, the city continues to evolve, and investment decisions, particularly in pre-leased opportunities, can offer stability and long-term growth for commercial real estate investors.

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Published January 15th, 2024 at 17:43 IST

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