Hyderabad’s office space sector is experiencing a significant supply-demand mismatch, with new completions outpacing absorption for the fifth year in a row. Since 2020, the city has seen 59 million square feet (mn sq ft) of new office space delivered but has absorbed only 48.5 mn sq ft, leading to an all-time high in vacant stock.

According to a new report by Vestian, a workplace solutions firm, Hyderabad now holds 28 mn sq ft of unoccupied office space—the highest among India’s top seven cities as of Q1 2025. This surplus is expected to grow even further in the coming months due to a strong pipeline of upcoming projects.

The city’s absorption in Q1 2025 stood at 2.6 mn sq ft, a 43% drop from the previous quarter. Hyderabad’s share in pan-India leasing activity also slipped from 21% in Q4 2024 to just 15%, signalling a sharp correction in tenant activity. “India’s office market maintained its growth momentum in Q1 2025,” said Shrinivas Rao, CEO of Vestian. “Even though the absorption decreased over the previous quarter, demand for office spaces by GCCs, IT-ITeS, BFSI, and Flex Spaces is expected to swell in the forthcoming quarters.”

Despite Hyderabad’s lag, the broader Indian office market showed resilience. Nationwide office absorption jumped 34% year-over-year in Q1 2025, reaching 17.96 mn sq ft, bolstered by sustained demand in western markets like Mumbai and Pune. These two cities saw their combined share in national absorption rise from 24% to 37% over the past year.

Vestian’s report also highlighted a slowdown in new construction activity across India. Total supply added in Q1 2025 was just 9.5 mn sq ft, down 39% from the previous quarter and 12% year-on-year. This dip was largely due to minimal new projects in Hyderabad, Chennai, Mumbai, and Kolkata during the quarter.

One major trend reshaping the landscape is the growing influence of artificial intelligence on the IT sector. The IT-ITeS industry continued to dominate leasing, accounting for 34% of total absorption in Q1 2025, just slightly down from 36% in the previous quarter. This sustained interest suggests that technology firms, particularly those adapting to AI-driven workflows, remain a driving force in the office real estate market.

Among all cities, Bengaluru led the country with 4.08 mn sq ft of office space absorption in Q1 2025, followed closely by Mumbai at 3.99 mn sq ft. Kolkata posted the lowest figure at the other end of the spectrum, with just 0.23 mn sq ft absorbed.

As Hyderabad prepares for another wave of office space completions, industry experts suggest that landlords and developers may need to explore flexible leasing models, such as coworking and managed spaces, to absorb the excess inventory and align with evolving tenant expectations. The rise of hybrid work and strategic demand from global firms presents both a challenge and an opportunity for the city’s commercial real estate sector.