Hyderabad’s office space market is undergoing significant transformation, with vacancy rates for Grade A offices projected to reach 24-24.5% by March 2026, a sharp rise from 14.1% in March 2023. According to a report by ICRA, this increase is driven by an unprecedented surge in office space supply that is outpacing demand.

From FY 2017 to FY 2024, Hyderabad’s office space supply recorded a compound annual growth rate (CAGR) of 14%, significantly higher than the 7% CAGR in India’s six major office markets. The city currently accounts for about 15% of the nation’s total office supply, which is expected to climb to 17% by 2026. “FY 2024 marked a record high supply of approximately 19 million square feet in Hyderabad, and this trend is likely to continue through FY 2025 and FY 2026,” said Anupama Reddy, Vice President at ICRA.

Demand-Supply Gap Creates Challenges

Despite robust supply, net absorption—the actual space leased—is projected to range between 9-12 million square feet annually. This imbalance contributes to higher vacancy levels, positioning Hyderabad to potentially record the highest vacancy rates among India’s top six cities, surpassing even Delhi NCR.

While the IT, technology, and financial services sectors continue to drive demand, they haven’t kept pace with the rapid supply growth. However, Peush Jain, Managing Director of Anarock Group, noted that rising corporate activity and economic growth could help offset some surpluses. “Grade A offices emphasising sustainability and technology are likely to attract tenants and command premium rents,” he added.

Geographic Trends and Tenant Preferences

Hyderabad’s North-West region, particularly areas like Hitech City, Gachibowli, and the Financial District, dominates the Grade A office market, accounting for 88-89% of the total supply. Hitech City remains a tenant favourite, with projected stable vacancy rates of 9.5-10%. In contrast, Gachibowli and the Financial District may face challenges, with vacancy levels expected to rise to 25-30% by March 2026 due to the heavy concentration of new developments.

Adapting to a Changing Market

The rapid expansion of office spaces reshapes Hyderabad’s commercial real estate landscape. While rising vacancy rates pose challenges, they also present opportunities for stakeholders willing to adapt. Sustainability-focused developments, modern amenities, and tech-forward facilities are increasingly critical for attracting and retaining tenants in this competitive market.

As Hyderabad continues to grow as a key hub for global and domestic businesses, the city’s commercial real estate players must navigate these shifts carefully. By aligning with evolving tenant preferences, the sector can mitigate risks and tap into the immense potential of this dynamic market.