India’s office real estate sector recorded its seventh consecutive quarter of declining vacancy, as tight supply and robust occupier activity drove the national average vacancy rate to 15.7% in Q1 2025, down 55 basis points (bps) from the previous quarter and 275 bps since Q2 2023, according to Cushman & Wakefield’s Q1 2025 India Office Market Report.

Limited New Completions Across Most Markets

New office space completions fell short of expectations in Q1 2025, totaling 10.7 million sq. ft. (MSF) — a drop of 13% year-on-year and 27% quarter-on-quarter, due to delays in project timelines and occupancy certifications.

New Supply by City (MSF)

86% of new supply came from just three cities: Bengaluru, Pune, and Delhi-NCR.

Vacancy at Multi-Year Lows

Despite moderate supply additions, vacancy dropped in six out of eight markets, most notably in Mumbai (down 227 bps) and Kolkata (down 140 bps).

Vacancy Rates – Q1 2025

Leasing Activity Stays Strong

Total gross leasing volume (GLV) in Q1 2025 touched 20.3 MSF, up 5% YoY and on par with the two-year average. Fresh leasing accounted for 80% of all transactions, continuing a three-quarter trend of steady expansion by occupiers.

Top Leasing Markets (GLV in MSF)

• Bengaluru: 4.86
• Mumbai: 4.31
• Pune: 3.49
• Delhi NCR: 2.75
• Hyderabad: 2.59
• Chennai: 1.97
• Kolkata: 0.26
• Ahmedabad: 0.07

Pre-commitments more than doubled quarter-on-quarter, reflecting strong future sentiment.

Net Absorption Rises Sharply

Net absorption — a key metric of market demand — hit 13.4 MSF, marking a 20% YoY rise and the third-highest quarterly figure ever.

• Delhi NCR, Mumbai, and Bengaluru accounted for 63% of this.
• Pune saw its highest-ever net absorption.
• Delhi NCR posted its strongest figure since Q4 2019.

Who’s Leasing? Sectoral Trends

The IT-BPM sector remained dominant, but Global Capability Centres (GCCs) are fast gaining ground.

Share of Gross Leasing Volume by Sector

Bengaluru led in GCC leasing with 37% share, followed by strong growth in Pune and Hyderabad.

Rents Move Up in High-Demand Markets

Demand outpaced supply in several cities, pushing up rentals:

• Mumbai saw the steepest rental rise at 10% QoQ
• Hyderabad, Ahmedabad, Delhi-NCR, and Chennai saw 2–4% QoQ growth

Expert Outlook

Anshul Jain, Chief Executive, India & SEA, said:

“India’s office market continues to build on strong fundamentals. The rise in GCC leasing, along with sustained demand and healthy supply pipelines, reflects global confidence in India’s business environment.”

Veera Babu, Executive Managing Director, added:

“Vacancy rates are now at a four-year low. With over 40 MSF of active demand, competition for premium office space will intensify, particularly in centrally located business districts.”

Looking Ahead

• Vacancy expected to tighten further amid supply lag
• Rental growth likely to sustain in high-demand micro-markets
• Strong pipeline of 40+ MSF expected to drive activity for the next 3–4 quarters

Also Read: Coworking Share in Office Real Estate at 27%

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Unprecedented Growth in Flexible Workspaces

Flexible workspaces, which include business centers, co-working spaces, and managed offices, now account for 14% of India’s total office leasing activity (89 MSF). Bengaluru led the market with 3.4 MSF of leasing volume, almost doubling its 2023 figures. Meanwhile, Mumbai recorded a 3x YoY increase, reaching 1.9 MSF, underscoring the growing appeal of flexible workspaces in India’s financial capital. Delhi NCR, Hyderabad, and Pune also emerged as key hubs, with leasing volumes of 2.3 MSF, 1.6 MSF, and 1.6 MSF, respectively.

Corporate Demand Fuels Surge in Flex Seat Leasing

In addition to office space leasing by operators, companies leased approximately 2.2 lakh seats from flexible workspace operators in 2024, a 44% jump from 2023’s 1.56 lakh seats. Bengaluru led the segment, accounting for 29% (~64,000 seats) of total flex seat leasing, followed by Pune (39,000 seats), Delhi NCR (38,000 seats), and Mumbai (28,000 seats).

The IT-BPM sector dominated flex seat leasing with a 48% share, followed by engineering and manufacturing (17%), BFSI (10%), and professional services (6%), indicating a diverse occupier mix across industries.

Key Drivers Behind the Demand

The significant growth in the flexible workspace sector can be attributed to:

• Evolving Business Needs: Companies are prioritizing operational flexibility and cost efficiency amid changing work dynamics.
• Hybrid Work Models: A shift toward hybrid setups has increased the need for managed office solutions.
• Expansion of Global Capability Centers (GCCs): New entrants and expanding companies are driving demand for premium flexible office spaces.
• Core+Flex Strategy Adoption: Large enterprises are increasingly combining traditional offices with managed workspaces to optimize costs and operations.

Industry Experts Weigh In

Commenting on the sector’s rapid expansion, Ramita Arora, Managing Director – Bengaluru & Head – Flex, India, Cushman & Wakefield, said:

“With new companies entering India and existing firms prioritizing flexibility and cost-effective solutions, the demand for managed office spaces continues to surge. Flexible workspaces now account for 14% of India’s total office leasing, firmly establishing them as a mainstream real estate solution.”

She further noted that Grade A and A+ assets will continue to see strong demand from leading managed space operators, with enterprises prioritizing best-in-class amenities, sustainability, and technology integration.

Outlook for 2025 and Beyond

The flexible workspace sector is expected to maintain strong growth in 2025, with global enterprises expanding their Core+Flex strategies. As demand for premium managed spaces rises, operators are focusing on customization, end-to-end services, and sustainability-driven solutions to cater to evolving corporate needs.

With a record-breaking 2024 and strong momentum heading into 2025, India’s flexible workspace sector is set to play a crucial role in shaping the future of office real estate.

Also Read: ANAROCK Acquires Flexible Workspaces Platform myHQ

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The growth is driven by increased activity in sectors such as IT-BPM, BFSI, engineering and manufacturing, along with the rising influence of Global Capability Centres (GCCs). Fresh leasing is projected to account for nearly 70% of the total gross leasing volume in 2024, highlighting growing business confidence and expansion by both global and domestic players.

“The robust momentum in India’s office real estate leasing reflects the strength and resilience of the country’s business ecosystem. With increased activity in sectors like IT-BPM, BFSI, and manufacturing, we are observing sustained demand for high-quality office spaces, particularly in prime micro-markets. This not only underscores the confidence of global and domestic players in India but also indicates a long-term positive outlook for commercial real estate, driven by infrastructure developments and new supply pipelines,” said Navin Makhija, Managing Director at The Wadhwa Group.

The period from January to September 2024 alone has seen 66.7 million square feet of office leasing, signaling strong year-end numbers. This upward trend also aligns with occupiers’ growing preference for Grade A, well-located office spaces with modern amenities.

“The office real estate sector’s expected milestone of 85 million square feet this year highlights the buoyant market sentiment and increasing business activity. As occupiers prioritize top-grade, well-located office spaces equipped with modern amenities, we are seeing heightened interest from both global entities and domestic businesses,” said Shraddha Kedia-Agarwal, Director at Transcon Developers.

Key micro-markets are experiencing moderate upward pressure on rents due to this demand, particularly in prime business hubs. While consistent supply influx helps maintain a tenant-favorable sentiment, rents are expected to rise steadily in 2025.

“The record gross leasing projections for 2024 are a testament to the steady growth and recovery of India’s office real estate sector post-pandemic. The rising contribution of GCCs and domestic firms expanding their operations showcases the vibrancy of our economy and the evolving workspace dynamics,” said Abhishek Jain, COO of Satellite Developers Private Limited (SDPL).

Cushman & Wakefield’s report predicts that GCCs will account for nearly 30% of the total gross leasing volume, further solidifying their role as a key driver of demand. Tenant representation experts highlight that India’s office sector is not only recovering but transforming to meet the evolving dynamics of workspace requirements, driven by technology, flexibility, and sustainability.

The future outlook for India’s commercial real estate remains optimistic, with prime micro-markets continuing to attract both occupiers and investors. As the sector moves towards a record-breaking year, the steady growth of office leasing reflects the resilience and long-term potential of India’s real estate landscape.

Also Read: Barnsley FC Chairman Neerav Parekh and Mother Kalpana Parekh Buy Luxury Flats in Mumbai for ₹170 Crore

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