Hyderabad Faces Record Office Vacancy as Supply Surpasses Demand in 2025

Hyderabad’s Office Market: A Tale of Oversupply and Vacancy

Hyderabad, once a frontrunner in India’s commercial real estate, now leads the nation in office space vacancy, reflecting a dramatic shift in the city’s market dynamics. Since 2020, developers have added an impressive 59 million sq. ft. of new office stock to Hyderabad’s skyline, but demand has lagged behind, with absorption totaling just 48.5 million sq. ft. over the same period.

By the end of Q1 2025, Hyderabad’s vacant office inventory soared to 28 million sq. ft.-the highest among India’s top seven urban markets. The city’s vacancy rate, now at 17.5%, has improved from the previous quarter’s 19% but remains a concern as new supply continues to outpace demand. With a robust pipeline of developments still underway, experts anticipate vacancy rates may climb further in the coming months.

“India’s office market maintained its growth momentum in Q1 2025, driven by sustained demand across the major office markets,” said Shrinivas Rao, CEO of Vestian, highlighting the resilience of the broader sector despite Hyderabad’s challenges.

National Trends: Construction Slows, Leasing Holds Steady

Across India, office construction activity slowed in Q1 2025, with new completions falling 39% quarter-on-quarter and 12% year-on-year to 9.5 million sq. ft. This decline was especially pronounced in Hyderabad, Chennai, Mumbai, and Kolkata, where minimal or no new supply entered the market.

Despite the construction slowdown, office leasing remained strong nationwide. The first quarter of 2025 saw a 34% annual increase in office space absorption, totaling 17.96 million sq. ft., driven by robust demand in western markets like Mumbai and Pune. These two cities saw their combined share of total absorption rise from 24% in Q1 2024 to 37% in Q1 2025.

Sectoral Drivers: IT and GCCs Fuel Demand

The technology sector remains a key driver of office demand, accounting for 34% of national absorption in Q1 2025. Global Capability Centers (GCCs), IT-ITeS, BFSI, and flexible office providers continue to anchor leasing activity, particularly in Bengaluru, which led the country with 4.08 million sq. ft. of office absorption.

City Comparisons: Vacancy Rates Across India

• Hyderabad: 17.5% vacancy, 28 million sq. ft. vacant
• Kolkata: 28.9% vacancy, 7.9 million sq. ft. vacant
• Delhi-NCR: 17% vacancy, 23.2 million sq. ft. vacant
• Bengaluru: 7.5% vacancy, 21 million sq. ft. vacant
• Mumbai: 8.3% vacancy, 12.5 million sq. ft. vacant
• Chennai: 7.1% vacancy, 6 million sq. ft. vacant
• Pune: 6.6% vacancy, 5.6 million sq. ft. vacant

Looking Forward: Market Adjustments Ahead

While Hyderabad’s office market grapples with oversupply, the broader Indian office sector remains resilient, buoyed by steady demand from technology and corporate occupiers. As developers recalibrate supply pipelines and occupiers reassess space needs in light of hybrid work and economic shifts, vacancy rates may gradually normalize.