Of the nearly 49 million square feet of new supply that hit the Indian office market in FY-23, office-space completions in Hyderabad and Bengaluru accounted for over 27 million square feet. That is 56 percent of the total new inventory. Both cities have seen office-space developers deliver on proposed projects, with developers in Bengaluru seeing absorption exceed FY-22 levels.

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According to Anarock, Hyderabad saw 14.94 million sq ft in new office completions in FY-23, while Bengaluru saw 12.66 million sq ft in the same period. For perspective, new supply in bigger markets like NCR and the Mumbai Metropolitan Region (MMR) were 8.82 million and 4.18 million sq ft, respectively. However, while Hyderabad and NCR have seen an uptick in new supply, MMR and Bengaluru saw new supply reduce in comparison with FY-22 levels.

A look at Pan-India office-space launches, however, doesn't make for great reading. Data suggests that developers may have turned circumspect when it comes to launching new projects, in keeping with the ongoing lull in the global economy. According to Anarock, FY-22 saw 48.66 million sq ft in new office-space launches, down 4.96 percent from 51.2 million sq ft launched the previous fiscal.

However, the one silver lining seems to be the increase in net absorption — 36.11 million sq ft in FY-23 versus 34.06 million in FY-22. Most cities, including MMR, NCR, Bengaluru and Chennai saw a net increase in absorption, which has in turn pushed vacancy levels lower, even if only slightly.

Grade-A office vacancy levels in the top-7 markets witnessed a 0.1 percent decline year-on-year despite layoffs and a clampdown on hiring in the second half of FY-22. Vacancy levels were 16 percent in FY-22; they reduced in 15.9 percent in FY-23.

'Office markets to remain muted till mid-2024'

However, the future may not be rosy. “The global slowdown in major economies of the world cast a shadow on the Indian office market in the second half," said Prashant Thakur, Head of Research at Anarock, "This trend is likely to continue in the near future. Major headwinds including layoffs by corporates and global recessionary trends will continue to mar office space growth in India."

Further, Anarock has forecast an uncertain 2024 for the Indian office market. "Many IT/ITeS companies have scaled down their business and are not looking to expand," Thakur added, "Office markets across top cities will remain muted in the remaining months of 2023 and early 2024. We expect some stability from the second half of 2024, depending on how the global economy shapes up."

This forecast is in line with IT majors giving up office space as it cuts workforce. Recently, Cognizant announced that it would give up 11 million sq ft of prime office space in large cities, sparking off concerns that it would dampen sentiment and demand for office space across big markets.

Investors, developers remain bullish

However, the uncertainty hasn't stopped institutional investors from infusing liquidity into office-space operators. Embassy Office Parks REIT recently announced a fund-raise of Rs 1,050 crore from institutional investors to refinance existing loans. "Our AAA-rated balance sheet, proactive debt management and industry-leading creditworthiness continues to attract capital from Mutual Funds, Insurers and Corporates," said Ritwik Bhattacharjee, Chief Investment Officer at Embassy REIT, in a statement.

Other players like DLF have maintained that leasing pipelines are healthy despite the slowdown in IT.

Recently, Bengaluru-based Prestige Group also announced that it would commence construction of 18 million sq ft of office spaces in Bengaluru by March 2024.