Hyderabad, Bengaluru, Chennai have high number of vacant offices

However, data shows that the demand for coworking spaces is on the rise.
Corporate office
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With increased new office completions, the main southern cities are witnessing a rise in their office vacancy levels despite high net absorption. Absorption refers to the amount of space, or units that get occupied within a marked over a specific amount of time, and subtracting the number of spaces vacated during the same time, gives you the net absorption. As per the latest data by Anraock property consultants, Bengaluru, Hyderabad and Chennai saw office vacancies increase by 4.2%, 3.9% and 2.78% respectively in H1 FY22 as against the same period in H1 FY21. Pune and Kolkata were the only top cities to see office vacancies decline marginally in this period.

Among office vacancies in south cities, Hyderabad has the highest vacancy levels at 15.20% in H1 FY22 as against 11.30% a year ago. As much as 4.5 mn sq. ft. new office space was added in the city in H1 FY22. In Bengaluru, office vacancy levels increased to 10.75% in H1 FY22 against 6.55% in H1 FY21. The city witnessed maximum new office completions in the period – approx. 7.3 mn sq. ft. Chennai saw the lowest vacancy levels at 10.40% in H1 FY22 as compared to 7.62% in H1 FY21.

In terms of new office completions, NCR saw a close to 123% jump in H1 FY22 against the same period last year. As much as 3.9 mn sq. ft. area was added in the region in this period. While Bengaluru witnessed the highest absorption of 3.2 mn sq. ft. in H1 FY22 among all the top 7 cities, it also saw a 6% reduction in net absorption as compared to H1 FY21. The net absorption in Hyderabad and Kolkata declined by 30% and 70% respectively in the same period.

Average monthly rentals in the top 7 cities have remained steady at around Rs 75/sq. ft. in H1 FY22 against the corresponding period in preceding fiscal year, the report states. IT/ITeS hubs like Bengaluru, Hyderabad and Pune saw a marginal rise of 3% each in average monthly office rentals in H1 FY22.

In another notable trend, the demand for coworking spaces is on the rise, the report said. “COVID-19 has clearly redefined the need for office spaces; businesses are heavily focused on cost optimization to tackle unprecedented crises such as lockdowns in the future. The cost advantage of coworking spaces clearly outstrip the possible risk factors,” it added. 

As per the report, recent data indicates that of the net office absorption of 10.76 mn sq. ft. in H1 FY22 across top 7 cities, the share of coworking has risen to 8%. In contrast, in H1 FY21, of net office absorption of 8.31 mn sq. ft., the share of coworking stood at 3%.

“Rising vacancies in the main southern cities can largely be attributed to increased new office space additions in the period. Altogether, the three cities saw new office space addition of 12.95 mn sq. ft. area in H1 FY22, accounting for nearly 58% share of the total new completions in top 7 cities (approx. 22.2 mn sq. ft.). However, despite this rise, the current office vacancy levels in the south cities are still lower than in other top cities like NCR, MMR and Kolkata,” said Prashant Thakur, Director and Head (Research) of the Anarock Group. 

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