The third quarter of 2023 witnessed a fascinating narrative unfold, marked by divergent trajectories in key cities. While Bengaluru, the IT hub, experienced a deceleration in leasing and supply, Hyderabad emerged as the front-runner, showcasing a remarkable surge in all segments. This nuanced shift, highlighted in a comprehensive report by Vestian, underscores the multifaceted evolution of India’s office markets.
The Vestian report unveils a broader picture of the country’s office sector, reflecting a 21% growth in leasing activity and a substantial 26% increase in new supply across seven major cities. Shrinivas Rao, CEO of Vestian, notes that the Indian office sector experienced heightened activities, with absorption reaching its zenith since the pandemic, and new completions hitting a five-quarter high.
Bengaluru, traditionally synonymous with the bustling IT landscape, faced headwinds as leasing transactions plummeted by 28%, coupled with a 25% decline in new supply. In contrast, Hyderabad witnessed a staggering 270% surge in leasing and a remarkable 175% increase in new supply, firmly positioning it as a market leader.
The Southern cities, in particular, demonstrated resilience, commanding the lion’s share of pan-India absorption and new completions. The IT and ITeS sector dominated leasing activities with a 25% share, followed by BFSI at 20%. Manufacturing & engineering, along with the flexible space sector, contributed 17% and 16%, respectively, showcasing the diverse drivers of demand.
The report also sheds light on healthy vacancy levels and an uptick in average rentals, signaling robust fundamentals and a sustained demand for quality office spaces in India. Vestian predicts a resurgence in Bengaluru’s office demand as major IT companies recall their staff to the workplace. Simultaneously, rentals are anticipated to soar across the seven cities, propelled by renewed demand as large conglomerates beckon their employees back to offices.
Hyderabad is swiftly ascending as a major metropolis in India, fueled by a thriving IT industry, robust infrastructure, and strategic location. Boasting a well-planned urban layout, the city attracts businesses and residents with its modern amenities and efficient transportation.
The Rajiv Gandhi International Airport enhances its global connectivity, while educational institutions contribute to a skilled workforce. Hyderabad’s cultural richness and cost-effective living environment add to its appeal. As the city continues to embrace innovation and diversify its economic sectors, it stands as a testament to India’s evolving urban landscape.
As the Indian office real estate scene transforms, Vestian’s quarterly analysis gives a broad view of the sector’s changes. It offers useful insights for businesses, investors, and policymakers adapting to these shifts.