Hyderabad's Grade A Office Space Vacancy to Surge by 2026: ICRA

Occupancy levels for Grade A office space in Hyderabad are projected to drop significantly to 75.5-76.0% by March 2026, compared to ~86.0% in March 2023, according to ICRA. This decline is attributed to a substantial oversupply outpacing net absorption.
Hyderabad's office supply grew at a robust CAGR of ~14% between FY2017 and FY2024, outperforming the ~7% growth in India’s top six office markets. As of March 31, 2024, Hyderabad accounted for 15% of total office supply among these markets, a share expected to rise to 17% by March 2026.
"Hyderabad’s unlimited FSI rule has encouraged large speculative constructions without near-term leasing visibility, leading to a sharp demand-supply mismatch," said Anupama Reddy, Vice President and Co-Group Head, Corporate Ratings, ICRA. The city recorded a historic high supply of ~19 million square feet (msf) in FY2024, the largest annual addition across India. This trend is expected to continue through FY2026, with 17-20 msf of new supply projected annually.
However, net absorption is anticipated to remain between 9-12 msf annually, pushing vacancy levels to 24-24.5% by March 2026, up from 14.1% in March 2023 and 19.3% in September 2024. Hyderabad is expected to have the highest vacancy rate among India’s top six cities by March 2026, surpassing Delhi-NCR.