The Indian office real estate market witnessed a robust start to 2025, with leasing activity across the top seven cities registering a 15% year-on-year (YoY) growth. A total of 15.9 million square feet of Grade A office space was leased in Q1 2025, underscoring the strong demand for commercial spaces amid a positive economic outlook.
Bengaluru and Delhi NCR emerged as key drivers of this growth, contributing nearly half of the total leasing activity. Chennai also showcased remarkable performance, with office space demand almost doubling to 2.9 million square feet, primarily driven by large transactions from technology firms.
Key Highlights of Q1 2025 Office Leasing:
- Conventional leasing dominates: Conventional workspaces accounted for 86% of the total Grade A office space demand, while flex spaces made up the remaining 14%.
- New supply steady: New office space supply remained stable at 9.9 million square feet, with Bengaluru, Delhi NCR, and Pune contributing nearly 90% of total completions.
- Vacancy rates drop: Strong demand momentum led to a 120-basis-point annual decline in vacancy levels, signaling a healthier market balance.
- Rental growth: Average office rentals surged 8% annually, driven by robust demand and limited new supply in key micro-markets.
City-Wise Leasing Trends (YoY Change)
| City | Q1 2024 (msf) | Q1 2025 (msf) | YoY Change (%) |
|---|---|---|---|
| Bengaluru | 4.0 | 4.5 | 13% |
| Chennai | 1.5 | 2.9 | 93% |
| Delhi NCR | 2.5 | 3.3 | 32% |
| Hyderabad | 2.9 | 1.7 | -41% |
| Kolkata | 0.2 | 0.1 | -50% |
| Mumbai | 1.9 | 2.2 | 16% |
| Pune | 0.8 | 1.2 | 50% |
| Total | 13.8 | 15.9 | 15% |
Source: Colliers India
New Supply Trends
Despite strong leasing demand, new office supply remained stable at 9.9 million square feet. However, the distribution of new supply varied significantly across cities:
- Delhi NCR saw a staggering 440% YoY jump in new supply to 2.7 million square feet.
- Pune also recorded a 150% increase in new completions, reaching 2.5 million square feet.
- Hyderabad witnessed an 88% drop in new supply, with only 0.3 million square feet added.
Sector-Wise Leasing Trends
- Technology firms led demand, leasing 4.4 million square feet (28% share of total absorption).
- BFSI (Banking, Financial Services, and Insurance) and Engineering & Manufacturing sectors collectively accounted for 36% of the total office space uptake.
- Flex space leasing surged 22% YoY, reaching 2.2 million square feet, driven by enterprise-level managed office solutions.
Outlook for 2025
The Indian office leasing market is expected to maintain strong momentum throughout the year, driven by corporate expansions, infrastructure development, and favorable policy measures. With sustained demand, flex spaces are anticipated to gain further traction, potentially constituting 12-15% of occupiers’ portfolios in the coming years.
Arpit Mehrotra, Managing Director, Office Services, India, Colliers, stated, “2025 has started on a strong note, with leasing activity driven by corporate expansions and rising investments in commercial real estate. With policy support and continued demand from global capability centers (GCCs), we expect a strong growth trajectory in Tier I and select Tier II cities.”
As India cements its position as a key global business hub, the commercial real estate sector is poised for sustained growth in the months ahead.
Also Read: Century Real Estate
