Hyderabad's real estate boom is expected to intensify, with an all-time high of 21.5 million square feet of new office space expected in the 2024 fiscal year (FY). According to debt instrument rating consultancy Icra, this would represent a 13% compound annual growth rate from FY2017-2024 compared to an average of 7% for the top six cities in India.

According to a press release from the firm, as of june 30, 2023, hyderabad accounted for 14.2% of the top six markets' total available office supply. By march 2024, the percentage is anticipated to rise to 15.5%, suggesting a solid prognosis for the nation's commercial office sector.

After the COVID-19 lockdowns, according to ICRA, hyderabad saw excellent net absorption in the fiscal years 2022 and 2023. This was supported by solid deal traction in new leases, offices restarting, and a steady improvement in physical occupancy of offices, lowering vacancy levels to 13.8% from 16.5 percent reported in march 2021.

According to the report, an all-time high supply increase from 86, as of march 2023, will cause occupancy in the hyderabad market for Grade A office spaces to drop by roughly 500 basis points, to about 81–81.5 percent, by march 2024.

The vacancy would increase by 500 bps due to the all-time high supply of 21.5 million sq. ft., according to Anupama reddy, vice president and co-group head of corporate ratings at Icra. The market's present oversupply situation may work in the new renters' interest. Due to agreed-upon rental escalations, it is anticipated that the rent for the currently leased premises would increase progressively. However, for new leases, landlords are expected to be accommodating by providing longer rent-free periods; as a result, the actual rent rate would be less than the going market rate.

The top three industries in hyderabad that continue to drive demand are BFSI, pharma/life sciences, and IT - business process management. Moreover, Anupama reddy predicted that over the medium term, the percentage of flexible workplaces will rise.

Hitec City, Gachibowli, and the Financial district in Hyderabad's northwest make for 88–89% of the city's total A-grade office space, while the three micro-markets account for 75%–76%.

Due to a larger supply than absorption, vacancy levels are predicted to be constant in Hitec City (8–8.5%), high in the Financial district (18–18.5%), and much higher in Gachibowli (19.5–20%, up from 11.6%) in FY2024. Hitec City continues to be the favored office location for renters despite having rental increases of about 9–10% when compared to Gachibowli and the Financial district because to its excellent transportation accessibility.

According to ICRA, the top 10 developers in hyderabad (out of a total of 130–140) account for 60–61% of the total supply of grade-A offices, with seven of the top 10 having healthy occupancy levels of over 85%, which is higher than the sustained average occupancy for hyderabad as a city.

Since india continues to be a popular location for global capability centres (GCCs), ICRA has maintained a steady stance on the commercial office sector in India. In the medium to long term, demand for the indian office portfolio will be driven by favourable demographics, a competent and cost-effective talent pool, and the availability of high-quality office spaces at reasonable rates, according to Reddy.
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14/09/2023 09:26 AM