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India's office real estate market continued its growth in Q1 2025, driven by strong leasing demand and limited new supply, pushing the national vacancy rate down to 15.7%. Bengaluru, Mumbai, and Pune led both leasing activity and saw the lowest vacancy levels. Despite a 12.66% decline in new supply year-on-year, leasing remained robust at 20.3 MSF, with IT-BPM, BFSI, and GCCs driving demand. Mumbai recorded the sharpest drop in new supply and the steepest fall in vacancy. Pre-commitments surged, reflecting occupier confidence, while rising rents in tight markets signalled increasing demand amid persistent supply constraints across key office hubs.
India's office real estate market continued its growth momentum in the first quarter of 2025, backed by strong leasing activity and limited new office supply. The overall office vacancy rate dropped for the seventh straight quarter, reaching 15.7%-down by 55 basis points (bps) from the previous quarter and marking a sharp fall of 275 bps from 18.45% in Q2 2023. This decline in vacancy highlights strong demand from occupiers and a slowdown in the addition of new office space. Advertisement
According to Cushman & Wakefield's Q1 2025 Office Market report, only 10.7 million square feet (MSF) of new office space was completed across India's top 8 cities, a 13% drop from the same period last year and 27% lower than the previous quarter. The decline was mainly due to delays in receiving occupancy certificates and project execution issues.
Bengaluru, Pune, and Delhi-NCR were responsible for most of the new space, contributing a combined 9.2 MSF or 86% of the total new supply. Hyderabad added 1.32 MSF, while Mumbai added just 0.18 MSF. Chennai, Kolkata, and Ahmedabad had no new office supply this quarter.
In Q1 2025, new office space supply across India showed a mixed trend, with sharp differences between cities. Bengaluru saw a 52.41% increase in new supply, while Pune posted the highest growth at 92.68%. In contrast, Delhi-NCR experienced a slight decline of 3.61%, and Hyderabad recorded a significant 54.81% drop. Mumbai witnessed the steepest fall, with new supply plunging by 86.84% from 1.35 MSF in Q1 2024 to just 0.18 MSF. Meanwhile, Chennai and Ahmedabad reported a complete halt in new supply, and Kolkata remained unchanged with no new additions in either year. On the whole, PAN India office supply declined by 12.66% year-on-year, highlighting an uneven performance across key markets.
Despite some cities witnessing new office additions, supply continued to trail behind demand, leading to a further drop in vacancy rates. Mumbai recorded the sharpest quarterly decline, with vacancy falling by 227 basis points, followed by Kolkata with a 140-bps dip. However, cities like Hyderabad (23.10%), Ahmedabad (24.01%), and Delhi-NCR (21.06%) continued to report high vacancy levels, indicating a possible oversupply or subdued demand. In contrast, Bengaluru maintained the lowest vacancy rate at 9.70%, with Pune and Mumbai also reflecting relatively healthier markets at 11.23% and 12.75%, respectively. The overall average vacancy rate across India's major office markets stood at 15.70%.
Office leasing remained steady and strong, with total gross leasing volume (GLV) reaching 20.3 MSF across the top 8 cities. This was a 5% increase compared to the same quarter last year and consistent with the two-year quarterly average of 20 MSF. Notably, fresh leases made up nearly 80% of all leasing activity, reflecting companies' continued expansion plans.
Leasing activity remained strong across major Indian cities in Q1 2025, with Bengaluru leading the charts at 4.86 million square feet (MSF), followed closely by Mumbai at 4.31 MSF. Pune recorded a healthy 3.49 MSF, while Delhi-NCR and Hyderabad saw leasing volumes of 2.75 MSF and 2.59 MSF, respectively. Chennai registered 1.97 MSF, whereas leasing activity in Kolkata and Ahmedabad remained limited at 0.26 MSF and 0.07 MSF. Notably, pre-commitments more than doubled compared to the previous quarter, reflecting a rise in occupier confidence and a positive outlook toward upcoming developments.
Net absorption-the actual space occupied, showing real demand-stood at 13.4 MSF in Q1 2025, making it the third-highest quarterly absorption ever. This marks a 20% increase from last year. Delhi-NCR, Mumbai, and Bengaluru made up 63% of this total, and Pune hit its highest-ever net absorption figure. Delhi-NCR also recorded its best performance since Q4 2019.
In terms of sectoral demand, the IT-BPM sector continued to lead office leasing in Q1 2025, accounting for 29% of total activity. The Banking, Financial Services, and Insurance (BFSI) sector followed with a 22% share, while flex space operators maintained a consistent 13%. Global Capability Centres (GCCs) saw notable growth, increasing their share to 31%, up from 28% in 2024. Bengaluru emerged as the key hub for GCCs, contributing 37% of all leasing in this segment, with Pune and Hyderabad also registering strong quarter-on-quarter gains.
With demand staying strong and supply limited in many cities, rental rates increased-particularly in high-demand markets. Mumbai saw the sharpest rental hike, with a 10% quarter-on-quarter increase. Hyderabad, Ahmedabad, Delhi-NCR, and Chennai also witnessed rental growth of 2-4%.
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