Hyderabad's office market recorded its highest-ever first-quarter gross leasing volume at 3.15 million square feet (MSF) in Q1 2026, a 21.6 per cent year-on-year surge, according to a report released on Tuesday, 19 May 2026. The city contributed roughly 14 per cent of India's total office gross leasing volume of approximately 22 MSF for the quarter, underscoring its growing weight in the national commercial real estate landscape.

Deal Size and Concentration

Large transactions of 1 lakh square feet or more dominated activity, accounting for 81 per cent of total leasing. Mid-sized deals in the 25,000–99,999 sq ft range contributed an additional 17 per cent. Geographically, demand was sharply concentrated: Madhapur alone accounted for 91 per cent of total leasing activity, cementing its position as the city's pre-eminent office corridor.

Absorption and Vacancy Trends

Despite the absence of any new office completions during the quarter, net absorption remained robust at 2.21 MSF, sustaining the momentum built through 2025 — when Hyderabad posted its strongest post-pandemic year for absorption, averaging roughly 2.27 MSF per quarter. The combination of zero new supply and healthy take-up compressed citywide vacancy by 260 basis points year-on-year to 20.22 per cent. In Madhapur, overall vacancy stood at just 7.5 per cent, with Grade A+ assets tightening further to an exceptionally low 4.8 per cent.

Rents at Record Highs

The city's average stock-weighted rent climbed 11.6 per cent year-on-year to ₹92.2 per sq ft, the highest level recorded to date, according to data from commercial real estate services firm Cushman & Wakefield. Madhapur commanded a rental premium at ₹105.5 per sq ft, supported by limited availability and sustained occupier demand. Gachibowli, by contrast, held a weighted average rent of ₹72.3 per sq ft, retaining a cost advantage that positions it as a preferred alternative for cost-conscious occupiers.

Sectors Driving Demand

IT-BPM remained the largest contributor to leasing activity at 36 per cent, followed closely by the flexible workspace segment at 30 per cent — a share that reflects the continued mainstreaming of managed and co-working formats among enterprise occupiers. BFSI accounted for 23 per cent of leasing, driven by global financial institutions expanding their footprint in the city. This sectoral diversity signals that Hyderabad's office demand is no longer a single-sector story.

What to Watch

With vacancy in prime Madhapur assets already at near-critical lows and rents at record levels, the next wave of supply completions will be closely tracked by occupiers and investors alike. Should new completions remain limited through the rest of 2026, further rental appreciation in Grade A+ stock appears likely, potentially accelerating the shift of cost-sensitive demand toward Gachibowli and emerging peripheral corridors.