In a recent report by occupier-focused workplace solutions firm Vestian, Hyderabad’s commercial real estate market has come under the spotlight for its widening gap between office space completions and absorption. Since 2020, the city has witnessed 59 million square feet (mn sft) of new completions against 48.5 mn sft of office space absorption, resulting in a growing inventory of vacant stock over the last five years.
Record-High Vacancy in Hyderabad
As of Q1 2025, Hyderabad leads India’s top seven cities in terms of vacant office stock, with 28 mn sft currently lying unoccupied. The persistent trend of new completions outpacing absorption has contributed significantly to this inventory build-up.
Despite robust leasing activity, the vacant stock is expected to increase further in 2025, fueled by a strong pipeline of upcoming supply in the city. This marks a concerning pattern, suggesting that developers may need to reassess delivery strategies in alignment with actual market demand.
Pan-India Trends: Slowdown in Supply, Uptick in Absorption
The Vestian report also highlighted a 39% quarter-on-quarter slowdown in pan-India construction activity, dropping to 9.50 mn sft in Q1 2025, which also reflects a 12% decline year-over-year. The slowdown is attributed to a near halt in new supply in Hyderabad and limited additions in cities like Chennai, Mumbai, and Kolkata.
Contrary to the slowdown in new supply, leasing activity showed resilience, with absorption across the top seven cities increasing by 34% year-over-year in Q1 2025, reaching 17.96 mn sft. This surge is largely driven by the western cities, particularly Mumbai and Pune, whose combined share of total absorption rose from 24% in Q1 2024 to 37% in Q1 2025.
AI Boom and Sectoral Shifts
One of the most significant drivers of office space demand has been the emergence of artificial intelligence, which has notably impacted the IT-ITeS sector. According to the Vestian report, IT-ITeS accounted for 34% of total absorption in Q1 2025, only slightly down from 36% in the previous quarter.
Shrinivas Rao, CEO of Vestian, remarked,
“India’s office market maintained its growth momentum in Q1 2025, driven by sustained demand across the major office markets. Even though the absorption decreased over the previous quarter, demand from GCCs, IT-ITeS, BFSI, and Flex Spaces is expected to swell in the forthcoming quarters.”
City-Wise Absorption (Q1 2025)
- Bengaluru: Dominated the market with 4.08 mn sft of absorption
- Mumbai: Close second with 3.99 mn sft
- Hyderabad: Logged 2.6 mn sft, accounting for 15% of pan-India absorption, a decline from 21% in Q4 2024
- Kolkata: Lowest among top cities with just 0.23 mn sft
Hyderabad’s 43% quarter-over-quarter drop in absorption underscores the need for a strategic rebalancing of supply and demand in its commercial real estate sector.
