Hyderabad MarketBeat Reports

Gross leasing in the Hyderabad office market was recorded at 2.5 MSF, a 125% growth y-o-y. Q1 leasing activity surpassed the average quarterly leasing recorded in 2023 by 11%. Net absorption remained stable at 1.6 MSF, with a slight 2% y-o-y decline. The BFSI sector dominated office space demand, commanding a 36% share of gross leasing. A 36% q-o-q decline in new supply led to a minor uptick of 57 basis points in vacancy rates. Q1 supply was concentrated towards the Gachibowli submarket, thereby increasing the vacancy rate by 367 bps, which stood at 45.92%. A 4% growth in overall rentals was witnessed compared to the same period last year.

Main street leasing in Hyderabad witnessed 45% quarterly growth in Q1-2024. Hypermarket store openings drove leasing volume, accounting for a 35% share. By the end of this year, approximately 3.5 MSF of cumulative retail mall supply will be operational. While main street locations have witnessed a slight uptick in rentals from previous quarters, prominent locations like Banjara Hills, Nallagandla and Kokapet among others saw a 15-25% average growth in rentals over the last few quarters, driven by robust demand.

Hyderabad residential launches saw a 44% drop on a q-o-q basis in the first quarter of 2024. This was due to robust numbers in 2023. The Western corridor dominated with 97% share in Q1 launches. Mid segment housing units led the supply (47%), receiving the highest contribution from Tellapur in the Western corridor (96%). The high-end and luxury category continues to grow with almost 50% share in Q1-24 launches. The newly proposed metro line is likely to unlock a promising residential corridor in Hyderabad, particularly in the southern and north-eastern regions. The quarter witnessed y-o-y growth in capital and rental values ranging between 8% and 15%.

Hyderabad warehousing sector witnessed a sharp decline of 60% from H1 2023 volume and an 80% drop on a y-o-y basis. The second half of the year was slow. Key reason was a drop in mid to large size deals, which drove more than 60% annual leasing activity in previous years. Warehousing demand rose in the northern corridor, making up for 60% of leasing share. Moving ahead, the state government is implementing industrial policies to drive foreign investments likely to be substantiated by Industrial infrastructure planned by the Hyderabad Metropolitan Development Authority. 

The investment activity recorded in Q2 was INR 158.5 bn (USD 1.92 Bn) which was 63% higher than the previous quarter’s activity and 60% higher than the activity recorded in Q2-22.