According to Vestian Research, new office completions across India fell drastically by 36% quarter-on-quarter to 9.7 million sq ft in Q1 2026—the lowest level seen in the past four quarters. The decline was led by major cities such as Bengaluru, Hyderabad, and Mumbai, where developers slowed down project deliveries due to supply chain disruptions and geopolitical concerns.

Hyderabad saw the steepest fall, with new completions plunging by a staggering 95%—from 6.0 million sq ft in Q4 2025 to just 0.3 million sq ft in Q1 2026. Mumbai and Bengaluru also reported notable declines in new supply on a quarterly basis, reflecting a broader trend of cautious project execution.

However, in stark contrast to the supply slowdown, office leasing activity remained robust. Total absorption rose 20% year-on-year to 21.53 million sq ft in Q1 2026, indicating sustained demand from occupiers despite global macroeconomic challenges.

This resilience has been largely driven by India’s growing appeal as a global business hub. Companies—especially Global Capability Centres (GCCs)—continue to expand operations in India due to cost efficiency, talent availability, and scalability. Stable macroeconomic factors such as steady GDP growth, controlled inflation, and relatively stable interest rates have further supported business expansion.

City-wise, Bengaluru continued to dominate the office market, recording 4.91 million sq ft of leasing activity, followed by Pune at 3.92 million sq ft—its highest-ever quarterly absorption. Hyderabad also showed strong demand with a 47% year-on-year growth in leasing.

Mumbai, despite a slight dip in absorption, retained its position as India’s most expensive office market, with rentals touching ₹152.6 per sq ft per month during the quarter.

The imbalance between strong demand and slowing supply has started tightening vacancy levels across major cities. Pan-India vacancy rates dropped to 9.5% from 10.8% in the previous quarter. As a result, rental values have continued to rise, especially in prime office locations, signaling a shift toward a landlord-driven market.

Industry experts believe this trend could continue in the near term. While supply constraints may persist due to global uncertainties, demand is expected to remain strong, fueled by rapid GCC expansion and increasing preference for sustainable and high-quality office spaces.

Looking ahead, India’s office real estate market appears poised for long-term growth, even as short-term supply-side challenges continue to shape the sector’s dynamics.

Also Read: Affordable Housing Crisis: Will Budget 2025-26 Turn the Tide?

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The quarter also saw gross leasing of approximately 0.8 million sq. ft., reflecting sustained demand for high-quality office spaces across Mindspace’s portfolio.

Strong Leasing and High Occupancy

Mindspace REIT maintained a committed occupancy of around 93.8%, which increases to 94.6% on a like-to-like basis, excluding the newly acquired Q-City (now rebranded as The Square 110 Financial District).

The REIT achieved a re-leasing spread of about 28%, indicating robust rental growth, particularly in Hyderabad’s Madhapur micro market. Mindspace also signed its first deal in Madhapur at approximately ₹100 per sq. ft. per month, underscoring the potential for further rental upside.

“With a robust balance sheet, low leverage, and declining cost of debt, we remain well positioned to deploy capital in our development pipeline and capitalize on the strong demand for Grade-A office spaces,” said Ramesh Nair, CEO & MD, Mindspace REIT.

Financial Performance: Revenue, NOI, and Distribution Up

For Q2 FY26, Mindspace REIT’s:

• Revenue from operations stood at ₹778 crore (up 24.8% YoY).
• Net Operating Income (NOI) stood at ₹634 crore (up 25.8% YoY).
• Distribution to unitholders increased by 16.3% YoY to ₹355 crore.
• Distribution per unit (DPU) grew 13.2% YoY to ₹5.83 per unit.

On a half-yearly basis, NOI for H1 FY26 rose by 25% YoY to around ₹1,250 crore. The record date for Q2 distribution is November 8, 2025, and payments will be made on or before November 14, 2025. Since its listing, the REIT has cumulatively distributed about ₹5,950 crore, translating to approximately ₹99.9 per unit.

Portfolio Value and Balance Sheet Strength

As of September 30, 2025, Mindspace REIT’s Gross Asset Value (GAV) rose to ₹41,020 crore, up from ₹36,647 crore in March 2025. The Net Asset Value (NAV) per unit stood at ₹483.7.

The REIT maintained a conservative Loan-to-Value (LTV) ratio of about 24.2%, reflecting strong financial stability. Its cost of debt further reduced by 32 basis points sequentially to 7.52% per annum, aided by refinancing and recent rate cuts.

Mindspace raised ₹1,700 crore through Commercial Papers at an effective rate of 6.12%, and ₹1,150 crore through Non-Convertible Debentures (NCDs) at 7.12%.

Sustainability and Global Recognition

Mindspace REIT continued to earn international recognition for its sustainability initiatives. For the third consecutive year, it achieved a 5-star GRESB rating and was named ‘Global Listed Sector Leader – Office Development Benchmark’.

Its Development Benchmark scored 100/100, ranking 2nd among 18 peers in Asia, while the Standing Investment Benchmark scored 93/100, also ranking 2nd among 20 peers in Asia.

Development Pipeline and Outlook

Mindspace REIT is actively progressing on an under-construction pipeline of approximately 3.7 million sq. ft., positioning it to capture future demand in India’s premium office markets. With low leverage and stable occupancy, the REIT remains optimistic about sustained growth in rentals and portfolio expansion.

The company believes the strong absorption trends across Hyderabad and Navi Mumbai will continue to drive performance in the coming quarters.

Also Read: Data Benchmarking Institutions Launched to Empower Indian REIT Investors

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The Mumbai Metropolitan Region (MMR) has emerged as the front-runner, posting the highest rental growth across the country, with a remarkable 28% increase in average monthly office rentals.

Commercial Office Rental Value Growth: 2022 to 2025

MMR: India’s Most Expensive Commercial Market

With an average monthly rent of ₹168 per sq. ft. in 2025, the Mumbai Metropolitan Region has become the most expensive commercial office market in the country. This marks a 28% increase from ₹131 in 2022.

Demand in MMR continues to be driven by prime micro-markets like:

• Bandra-Kurla Complex (BKC) – financial institutions’ top choice
• Lower Parel – popular with media, corporate offices
• Andheri East – favored by startups and IT/ITES firms

According to Peush Jain, MD – Commercial Leasing & Advisory, ANAROCK Group:

“American firms are playing a pivotal role here. In Mumbai alone, US-based banks and financial services companies account for nearly 48% of BFSI leasing. This reflects their continued confidence in Indian office spaces, particularly high-end, Grade A properties.”

Hyderabad: A Rising Star in the South

Hyderabad recorded the second-highest growth in rentals, rising from ₹59/sq.ft. in 2022 to ₹72/sq.ft. in 2025 — a 24.1% increase. Several factors are behind this surge:

• Relatively affordable rents compared to Mumbai and NCR
• A vibrant IT and tech ecosystem, particularly in HITEC City and Gachibowli
• Proactive government policies to attract investment
• Availability of Grade A office stock at competitive rates

These elements make Hyderabad increasingly attractive for both Indian and global firms.

Delhi NCR: Strong Momentum Driven by Noida & Gurugram

With a 20% rental value increase from ₹92 to ₹110/sq.ft., Delhi NCR has emerged as one of the most active leasing markets. The rise has been powered by:

• Massive infrastructure development (e.g., expressways, metro expansion)
• Growth in Gurugram’s commercial hubs
• High leasing activity in Noida, including large-format offices by tech firms and Global Capability Centres (GCCs)

Delhi NCR captured 23% of all GCC leasing demand in Q1 2025, underlining its rising importance in the national commercial landscape.

Bangalore, Pune & Chennai: Moderate But Stable Growth

• Bangalore saw a 15.8% increase, with rentals rising from ₹82 to ₹95/sq.ft. Prime areas like Whitefield, ORR, and Electronic City continue to attract major tech occupiers.
• Pune’s rental values rose from ₹72 to ₹80/sq.ft. (11.1%). While the growth is modest, the city remains a favorite among IT/ITES and R&D players due to its workforce strength and quality infrastructure.
• Chennai witnessed a 9.1% increase, reaching ₹72/sq.ft. by 2025. Leasing demand here is stable, largely driven by manufacturing, automobile, and IT sectors.

Key Drivers Behind the Surge

• Post-pandemic rebound: Companies are gradually returning to physical office spaces, moving away from purely hybrid models.
• Global Capability Centres (GCCs):
  • Accounted for 8.35 million sq. ft. leased in Q1 2025 alone
  • Represent over 37% of all leasing in the top 7 cities over the past two years
  • Driving transformation of India into a global outsourcing and innovation hub
• Continued interest from global firms:
  Especially from American companies, which account for 45% of total office leasing across India — the largest foreign contributor.

Investor Sentiment & Outlook

• Improving rental yields: Especially in markets like Hyderabad and Delhi NCR, where capital values are still competitive.
• Rising popularity of REITs: Retail and institutional investors alike are showing stronger interest in commercial real estate portfolios.
• Strong leasing pipeline: Tech parks, co-working spaces, and SEZs are all seeing sustained demand.

Peush Jain adds:

“The future of work in India is not remote but reimagined. Hybrid work isn’t replacing offices, it’s complementing them. This is reflected in the robust and resilient leasing momentum we’re seeing across the country.”

Conclusion: Demand Outpacing Supply in Prime Markets

As India strengthens its position as a global tech and business destination, and supply remains constrained in key micro-markets, rental values are expected to continue their upward trend. MMR will likely retain its top position, while cities like Hyderabad, Delhi NCR, and Bangalore will drive the next wave of commercial growth.

Also Read: India Commands APAC Office Leasing in 2024, Captures Record 47% Share

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Delhi-NCR showed strong demand, nearing 10 million sq ft of leasing activity, while Chennai and Pune recorded relatively subdued growth. Flex spaces emerged as a key driver, with annual absorption reaching an all-time high of 12.5 million sq ft, accounting for 19% of the total space uptake in 2024.

Record-breaking Quarter Boosts Annual Activity
The fourth quarter of 2024 saw the highest leasing activity of the year at 19.7 million sq ft, a 14% quarter-on-quarter growth. Bengaluru and Hyderabad were the top contributors, accounting for 54% of India’s total leasing during Q4. Bengaluru alone recorded 6.6 million sq ft of leasing in Q4, while Mumbai and Hyderabad witnessed the highest QoQ growth at 71% and 41%, respectively.

Arpit Mehrotra, Managing Director, Office Services, India, Colliers, said, “Grade A office space demand has broken all records, with leasing activity reaching 66.4 million sq ft in 2024. Bengaluru accounted for one-third of the total demand, while Hyderabad and Mumbai also achieved double-digit leasing for the first time.”

Sector-wise Performance
The technology sector continued to lead the demand, accounting for 24% of the total leasing activity with 16.3 million sq ft. Flex spaces saw the most significant growth, with a 45% YoY increase, contributing 12.5 million sq ft to the overall demand. BFSI and engineering sectors also showed robust performance, with both crossing the 10 million sq ft mark.

New Supply Keeps Pace
India’s office market added 53.3 million sq ft of new supply in 2024, a 6% increase from the previous year. Bengaluru and Hyderabad accounted for 54% of the new completions, with Mumbai recording an impressive 655% annual growth in new supply. Despite the significant supply, vacancy levels dipped by 80 basis points, while rentals increased by 5%.

Vimal Nadar, Senior Director and Head of Research, Colliers India, noted, “Flex operators accounted for 20% of the total office space demand in 2024, a significant jump from previous years. This trend is likely to expand into Tier-II and Tier-III cities in 2025, driving further growth.”

Looking Ahead
With demand exceeding supply in key markets and a sustained interest in Grade A office spaces, India’s office leasing activity is expected to stabilize at elevated levels. Annual leasing exceeding 60 million sq ft is projected to become the new norm in the coming years.

Also Read: Record-Breaking Real Estate IPOs in 2024: INR 135 Billion Raised

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