Hyderabad Tops Office Vacancy as Supply Outpaces Demand
Hyderabad has emerged as the city with the highest office space vacancy among India's top seven urban markets, driven by persistent supply outpacing demand since 2020. According to new research by Vestian, 59 million sq. ft. of new office stock has been completed in the city since 2020, while 48.5 million sq. ft. has been absorbed, resulting in a growing inventory of unoccupied space.
By the end of Q1 2025, Hyderabad's vacant office inventory reached 28 million sq. ft., the highest among major metros. The vacancy rate is expected to climb further due to a steady flow of new developments in the pipeline, even as overall national construction activity saw a quarterly decline.
Pan-India construction levels dropped 39% from the previous quarter and 12 per cent year-on-year, totaling 9.5 million sq. ft. in Q1 2025. This slowdown was partly due to minimal or no new supply additions in Hyderabad, Chennai, Mumbai, and Kolkata during the period.
Despite reduced construction activity, office leasing across top Indian cities remained steady. The first quarter of 2025 saw a 34 per cent annual increase in space absorption, totaling 17.96 million sq. ft. Strong demand in western markets such as Mumbai and Pune fueled this growth, with their combined share rising from 24 per cent in Q1 2024 to 37 per cent in Q1 2025.
Technology sector requirements, particularly from the IT-ITeS segment, continue to support demand. This sector accounted for 34 per cent of the national office absorption in Q1 2025, following a 36 per cent share in the prior quarter. The expanding influence of artificial intelligence has significantly impacted IT leasing patterns and expansion plans.
Shrinivas Rao, FRICS, CEO of Vestian, noted, "The Indian office market has held its ground in early 2025, propelled by steady demand from sectors like GCCs, IT-ITeS, BFSI, and flexible office providers. While quarter-on-quarter absorption dipped, forward-looking demand signals remain positive."
Q1 2025 Market Data Overview:
- Bengaluru led the country with 4.08 million sq. ft. of office absorption, accounting for 23 per cent of the national total, despite a 3 per cent quarterly decline.
- Mumbai followed with 3.99 million sq. ft., up 60 per cent year-on-year but down 11 per cent from the previous quarter.
- Pune reported a 276 per cent annual increase, absorbing 2.66 million sq. ft., raising its share from 5 per cent to 15 per cent.
- Chennai posted the steepest annual fall in absorption at 52 per cent, down to 1.6 million sq. ft.
- NCR (Delhi region) saw 2.73 million sq. ft. of absorption, up 51 per cent year-on-year.
- Kolkata had the lowest absolute absorption at 0.23 million sq. ft., but posted sharp increases of 44 per cent YoY and 289 per cent QoQ.
New Completions Data:
- Bengaluru led new completions with 3.5 million sq. ft., representing 37 per cent of the national total.
- Pune followed with 2.9 million sq. ft., or 31 per cent of new supply.
- NCR doubled its completions to 2.6 million sq. ft., a 44 per cent quarterly rise.
Among occupiers, GCCs led leasing activity in Bengaluru with 39 per cent of the city's absorption. The sector saw a 39 per cent quarterly and 119 per cent yearly increase.
Hyderabad, despite a 17 per cent rise in annual absorption, recorded negligible new completions in Q1 2025, pushing its vacancy level to a record high.
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