Strong demand boosts office occupancy in Bengaluru and Hyderabad

Demand for office spaces is increasing, driven mainly by global capability centres, flexible workspaces, and the IT sector. This trend has led to lower vacancy rates and higher occupancy levels in Grade-A office spaces. Recent reports show that key areas, including Outer Ring Road in Bengaluru and Cyber City in Gurugram, have experienced a drop in vacancies. Real Estate Investment Trusts (REITs) have benefited from this trend, seeing occupancy improvements of 200 to 500 basis points in the last nine months. For example, Embassy Office Parks REIT reported an occupancy rate of 87% in Q3FY25 and expects it to rise to 88% by March. Other REITs also show positive trends. Brookfield India Real Estate Trust is anticipating a rise in its occupancy from 87% to 89%. Mindspace aims to increase its committed occupancy from 91% to between 92.5% and 92.9% by the end of the fiscal year. Despite the growth, the IT sector is facing challenges. Large IT companies have recently cut jobs, reducing their overall workforce. However, employee utilization rates remain healthy. Companies are encouraging workers to return to the office, which could support ongoing demand for office spaces. In addition, the limited supply of new office spaces in 2024 has helped keep vacancy rates low. The real impact of new office space supplies will be crucial for future office rentals, vacancies, and occupancy rates.