India Office Market Dynamics – Q1 2025

The India office market remained firmly entrenched on the growth runway, with domestic occupiers ramping up their activity to record levels and leasing 8.82 mn s.f. in Q1 2025. Global occupiers continued to remain the mainstay of leasing activity, nevertheless, driven primarily by GCCs.

Gross leasing in Q1 2025 at 19.46 mn s.f. was the highest among comparable first-quarter numbers and carried forward the momentum of the past two years. On a y-o-y basis, gross leasing for the top seven cities was up 28.4% at the pan-India level and higher for all cities, barring Chennai.

Bengaluru remained the leader in the quarterly leasing activity for the fourth straight quarter with a 21.9% share with Delhi NCR following closely behind with 21.6%. Pune jumped to the third spot with a 16% share of gross leasing in Q1, backed by strong pre-commitments with Hyderabad and Mumbai following behind.

Gross leasing figures in Q1 2025 were driven by Tech showing healthy momentum and leading the occupier segments with a 29.6% share. Flex remains a dominant participant in the leasing landscape, accounting for a 20.4% share and marking the third successive quarter when it has leased ~4 mn sq ft or higher in absolute terms.

New completions were recorded at 10.5 mn s.f. in Q1 2025, down by 34.5% q-o-q, however, on y-o-y basis up by 27.1%. The new completions during the quarter were headlined by Bengaluru, Delhi NCR and Pune, which accounted for a combined 78.2% share.

Headcount and footprint growth-oriented demand saw net absorption jump by 54% y-o-y on a pan-India basis to 12.78 mn sq ft. The net absorption numbers for Q1 2025 were the highest among all first quarters going back all the way to 2008.

Overall vacancy for the top seven cities was recorded at 15.7%, down by 50 bps q-o-q and the lowest in four years. This was underpinned by the strong net absorption numbers across nearly all cities, with vacancy dropping q-o-q across all, barring Pune. Vacancy in key office clusters remains in the tight single digits.

On a q-o-q basis, average rental values across all the major office markets continued to increase marginally, with growth in the range of 0.1%-6.5%. Hyderabad, Kolkata, Bengaluru and Delhi NCR witnessed the maximum growth during the quarter. The rental values on a y-o-y basis (Q1 2025 vs Q1 2024) have increased across all cities, with Hyderabad witnessing the maximum growth of 14.5%, followed by Kolkata and Bengaluru with growths of 13.2% and 6.3%, respectively. Mumbai, Delhi NCR, Chennai and Pune recorded 6.1%, 6.0%, 3.1% and 1.7% y-o-y rental growths, respectively.

There remains a sustained runway for growth as we continue to see strong demand from global and domestic occupiers. While the growth is expected to pivot around GCC activity, domestic occupiers will likely play a bigger role, especially those from the flex, BFSI and manufacturing segments. A short-term sluggishness in market activity may be seen as firms evaluate the impact of tariffs – both implied as well as explicit. The uncertainty may also act as a tailwind to more offshoring opportunities for India from global firms. The fundamentals seem to support India’s continued dominance as an office destination among global firms, mostly driven by its prominence as a R&D capability hub across multiple industry domains.