The numbers signal a clear shift in investor strategy and growing confidence in stable, income-generating assets, even as global uncertainties persist.

Core Assets Drive the Market

The biggest highlight of the quarter is the massive 178% surge in core asset investments, which reached USD 1.03 billion in Q1 2026.

This momentum has already accelerated into Q2, with USD 1.48 billion worth of deals closed in just the first month, indicating strong pipeline activity.

What are core assets?

• Ready properties
• Rental income-generating
• Lower risk, stable returns

This shift shows investors are prioritizing predictability over speculation.

Office Sector Still Dominates

Between 2021 and Q1 2026:

• Office assets: 45% share of total investments
• Residential sector: 28% share

Strong office fundamentals continue to attract capital:

• Stable occupancy levels
• Rising rentals
• Quality supply

Domestic Capital Takes Control

A major structural shift is underway:

• 2025: Domestic investors captured 52% market share
  First time since 2014
• Q1 2026: Domestic share surged to 72%

This marks a decisive shift away from foreign capital dominance, which defined the last decade.

Why this matters:

• Reduces dependence on global capital flows
• Makes the market more stable
• Reflects growing confidence among Indian institutions

REITs Become Game Changers

Indian REITs and InvITs are emerging as key drivers of this transformation:

• Deployed USD 2.8 billion
• Accounted for 47% of domestic investments
• Focused largely on core assets

These structured platforms are:

• Improving transparency and governance
• Enhancing liquidity
• Attracting institutional capital at scale

Expert View

According to Lata Pillai, Senior Managing Director & Head of Capital Markets, India:

“India’s investment market continues to demonstrate remarkable resilience amid global headwinds. The surge in core asset acquisitions reflects a shift toward stable income-generating properties, while domestic capital and REITs are strengthening market liquidity and confidence.”

Record-Breaking Momentum Continues

The current growth builds on a strong base:

• 2024–2025 combined investments: USD 19.4 billion
• Consistent > USD 5 billion annually since 2018
• Post-pandemic recovery began in 2021 and accelerated steadily

This positions India as one of the most attractive global real estate investment destinations.

Resilience Amid Global Uncertainty

Despite:

• Geopolitical risks
• Slower global capital flows
• Macroeconomic uncertainty

India’s real estate sector is showing:

• Strong domestic backing
• Diversified investment base
• Increasing institutional maturity

What Lies Ahead

The outlook remains positive for 2026:

Strong domestic capital pipeline
Mature REIT ecosystem
Infrastructure-led growth
Continued interest from global investors

The shift toward core assets + domestic dominance is making India’s real estate market more resilient and future-ready.

Also Read: Institutional Investments in Indian Real Estate Reach Historic Highs in 2024, Surpassing 2007 Record

The post India’s Real Estate Investment Jumps 37% to $1.7 Billion in Q1 2026, Core Assets Lead the Rally appeared first on Square Feat India.

This marks the 11th consecutive quarter of declining vacancy, signalling a clear shift towards a landlord-driven market.

Why Vacancy Is Falling

The sharp drop in vacancy is being driven by two key factors:

• Strong leasing demand across sectors
• Significant slowdown in new office supply

New office completions stood at just 8.8 million sq ft in Q1 2026, showing a 43% drop quarter-on-quarter and 18% decline year-on-year, mainly due to project delays.

At the same time, leasing activity remained robust, tightening the availability of quality office space.

City-wise Trends: Bengaluru & Mumbai Lead

Some cities are already witnessing extremely tight office markets:

• Bengaluru: Vacancy at just 7.81%, with some micro-markets as low as 2%
• Mumbai: Vacancy down to 9.21%, with prime areas below 3%
• Chennai, Pune, Kolkata: Continued decline in vacancy levels

On the other hand:

• Hyderabad: 20.22% vacancy
• Delhi NCR: 19.03% vacancy
• Ahmedabad: Highest at 30.16%

This shows that while demand is strong overall, premium locations are getting tighter much faster.

Rents Cross ₹100/sq ft for First Time

With vacancy shrinking, rents are rising:

• Average rents crossed ₹100 per sq ft/month for the first time
• Hyderabad: ~12% annual growth
• Delhi NCR: ~10% growth
• Mumbai & Chennai: ~6% growth

This indicates that landlords are gaining pricing power, especially in high-demand micro-markets.

Leasing Activity Remains Strong

Total leasing activity (Gross Leasing Volume) stood at:

• ~22 million sq ft in Q1 2026
• 13% growth year-on-year

Top Performing Cities:

• Mumbai: 6.6 MSF (highest ever quarterly leasing)
• Bengaluru: 5.13 MSF
• Hyderabad: 3.15 MSF
• Delhi NCR: 2.80 MSF

Mumbai stood out with record leasing, largely driven by renewal deals and strong occupier demand.

Who Is Driving Demand?

The biggest demand driver continues to be Global Capability Centres (GCCs):

• Leased ~8.7 million sq ft
• Accounted for ~40% of total demand
• Recorded 38% YoY growth

Sector-wise Demand:

• IT-BPM: 23%
• BFSI: 21%
• Flexible workspaces: 18%
• Engineering & manufacturing: 15%

This shows a diversified demand base, reducing reliance on a single sector.

Supply-Demand Gap Widens

Even though demand is strong, net absorption dropped to 11.51 MSF:

• ↓28% QoQ
• ↓24% YoY

This is mainly because new supply is not getting completed fast enough, delaying occupancy of pre-leased spaces.

What Lies Ahead for 2026

Experts believe:

• Around 61 million sq ft of new supply may enter the market in 2026
• Much of it will be premium Grade A+ office space
• Vacancy may ease slightly, but remain tight overall

However, global uncertainties like the West Asia crisis could slow down expansion plans in the short term.

What This Means (Simple Takeaway)

• Office demand in India is strong
• Supply is limited, creating a shortage
• Vacancy is falling and rents are rising
• Premium office spaces are becoming harder to find

This clearly signals a landlord-favourable market, especially in top business districts.

Also Read: Hiring Wave Ahead: Office Space Demand Soars

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The survey reveals that 87% of investors, by assets under management, plan to increase their direct exposure to commercial real estate in 2026, while 62% expect to be net buyers. This marks a clear shift from the cautious sentiment seen in recent years. Against this backdrop, India is steadily strengthening its position as a preferred destination for long-term global capital, offering scale, income visibility and improving asset quality.

While the UK and Germany continue to top the list of global capital destinations, India is transitioning from a peripheral emerging market allocation to a strategic component of Asia-Pacific real estate portfolios. Investors are increasingly attracted to India’s resilient occupier demand, expanding base of institutional-grade assets and favourable demographic profile.

Offices have re-emerged as the most targeted asset class globally, with 69% of investors planning allocations in 2026. However, capital remains selective, focusing on well-located, ESG-compliant and future-ready office assets. This trend closely mirrors India’s office market, where leasing activity continues to be driven by Global Capability Centres (GCCs), technology firms and domestic corporates, together accounting for nearly three-fourths of demand across major cities such as Mumbai, Bengaluru, Delhi-NCR, Hyderabad, Pune and Chennai.

Beyond offices, living sectors have emerged as the second most preferred asset class globally, with 65% of investors targeting allocations. Although institutional rental housing and student accommodation are still nascent in India, Knight Frank notes that these segments present a sizeable medium- to long-term opportunity due to rapid urbanisation and a young, mobile population.

Industrial and logistics assets remain a high-conviction segment, supported by supply-chain reconfiguration, e-commerce growth and infrastructure investment—trends that are particularly pronounced in India. Retail assets have also returned to investor focus globally, with over half of respondents planning allocations, reflecting stabilisation and renewed interest in dominant, experience-led shopping centres.

The survey highlights a growing preference for joint ventures and capital partnerships, with 68% of investors—representing USD 94 billion of planned investment—open to collaborative structures in 2026. This approach is especially relevant in India, where local execution capability, governance and platform scale play a critical role in investment success.

Operational real estate segments such as data centres, healthcare and infrastructure are also gaining traction globally. In India, rising digital adoption, expanding healthcare needs and sustained public infrastructure spending are translating into growing investor interest across these sectors.

Knight Frank noted that interest rates remain the single most influential factor shaping investment decisions, followed by occupier demand and bond yields. While geopolitical risks persist, investors are increasingly willing to look beyond short-term volatility and focus on repriced assets and sectors aligned with long-term structural tailwinds.

Also Read: India’s Real Estate Market Shows Resilience in 2025 Despite Global Headwinds

The post Global Real Estate Investors Return in Force in 2026 as India Gains Strategic Importance appeared first on Square Feat India.

Both current and future sentiment scores remained above the crucial 50-mark, signalling optimism, even as the market adopts a more disciplined, fundamentals-driven approach. The data suggests that while the exuberance of 2023–24 has eased, confidence is now supported by stronger macroeconomic visibility, steady funding access, and resilient office demand.

Sentiment Scores Hold Steady in Optimistic Zone

The Current Sentiment Score rose marginally to 60 in Q4 2025, up from 59 in the previous quarter, while the Future Sentiment Score held steady at 61. These readings reflect balanced expectations for the next six months, following the moderation seen earlier in 2025.

Although sentiment remains below the highs of 2023–24, the stability itself is significant. It points to a market that has absorbed earlier headwinds and is now progressing on more sustainable fundamentals—backed by easing inflation, improving liquidity conditions, and steady domestic economic growth.

Macroeconomic Visibility and Funding Conditions Boost Confidence

A key driver behind stabilising sentiment has been the broader economic environment. India’s real GDP growth of 8.2% in Q2 FY 2025–26, compared to 5.6% in the same period last year, has reinforced stakeholder confidence.

Survey responses indicate:

• 52% of respondents expect economic momentum to improve
• 29% foresee stability
• Only 19% anticipate a slowdown

Funding sentiment also strengthened during the quarter. Over 90% of stakeholders expect funding availability to either improve or remain unchanged, reflecting policy continuity and a continued preference for quality assets. While lenders and investors remain selective, liquidity across asset classes remains supportive.

Office Market Continues to Anchor Overall Confidence

Among all asset classes, the office sector remains the strongest pillar of confidence. Robust leasing activity—especially from Global Capability Centres (GCCs)—has kept sentiment firmly positive across major cities.

Limited availability of quality Grade A office space has:

• Encouraged pre-leasing and early commitments
• Supported firm rental expectations
• Improved sentiment around future office supply pipelines

In Q4 2025:

• 58% of stakeholders expect leasing activity to increase
• 49% anticipate rental growth
• A majority expect supply additions to rise, signalling confidence in long-term occupier demand

Residential Markets Show Stability, Not Speculation

Residential sentiment improved modestly in Q4 2025, driven by steady demand in higher ticket-size segments and a disciplined approach to new launches. Developers are closely aligning supply with demand visibility, focusing on inventory management rather than aggressive expansion.

Survey data shows:

• 40% expect sales to increase
• 50% expect new launches to rise
• 46% foresee price growth

While sales momentum has softened compared to earlier peaks, improving financing conditions and stable end-user demand have kept residential sentiment firmly in the optimistic zone.

Zonal Sentiment Turns Broad-Based

For the first time in recent quarters, future sentiment improved across all regions, with every zone remaining in optimistic territory:

• South Zone (Score: 62): Continues to lead, supported by strong office leasing in Bengaluru and Hyderabad, along with resilient high-ticket residential demand.
• East Zone (Score: 62): Improved on the back of steady mid-segment housing demand.
• West Zone (Score: 62): Strengthened due to stable commercial activity and calibrated residential development.
• North Zone (Score: 59): Recovered after earlier softness, aided by office traction and ongoing infrastructure momentum.

The regional spread of optimism highlights confidence anchored in urban demand and improving macro conditions rather than speculative growth.

Institutions More Confident, Developers Remain Cautious

A notable trend in Q4 2025 is the divergence between institutional stakeholders and developers.

• Institutional investors, banks, and PE funds recorded a Future Sentiment Score of 63, reflecting confidence in asset quality and liquidity.
• Developers reported a lower score of 58, underscoring a cautious, demand-aligned approach to growth.

This gap indicates a healthier market dynamic—where capital is available, but deployment is guided by prudence rather than exuberance.

Sector Poised for a Steady 2026

Commenting on the findings, industry leaders highlighted that the market has transitioned from correction to consolidation. Residential markets are showing clearer signs of stability, while the office segment continues to outperform. Improved macro visibility, easing inflation, and disciplined capital deployment are reinforcing confidence across regions and asset classes.

As India’s real estate sector steps into 2026, the data suggests a steadier, more mature growth phase—driven by demand-led strategies, institutional confidence, and a renewed focus on fundamentals rather than speculative momentum.

Also Read: Real Estate Optimism Strengthens in Q3 2025 as Sentiment Index Climbs

The post India Real Estate Enters 2026 on Stable Ground: Sentiment Holds Above 60, Office Market Leads Confidence Revival appeared first on Square Feat India.

While the broader Asia-Pacific region braces for moderated growth due to trade uncertainties and shifting policies, India’s office and logistics sectors are projected to lead with sustained momentum, flexibility, and qualitative consolidation.

India’s Office Market: Poised for Historic Peaks and Quality-Driven Demand

India’s office sector enters 2026 on a high note, building on a record-breaking 2025 where gross leasing volumes are expected to surpass 80 million square feet. Cities like Bengaluru, Mumbai, and the National Capital Region (NCR) remain frontrunners, with rental growth forecasted at 7.5–9% year-on-year—placing India among the top performers in the region.

A key milestone: India’s Grade A office stock across the top eight cities crossed 1 billion square feet in 2025. Occupiers are increasingly prioritizing flexibility—shorter leases, managed offices, and hybrid-ready spaces—amid global uncertainties. Landlords are responding with retrofitting investments in HVAC, sustainability, and employee well-being features.

Shishir Baijal, International Partner, Chairman & Managing Director, Knight Frank India, commented: “India continues to stand out as a strategic growth market. The country’s affordability, depth of talent, regulatory stability and a maturing workplace ecosystem enhance its appeal relative to other global hubs.”

In contrast to challenges in Greater China (elevated vacancies) and moderation in Singapore and Australia, India’s limited oversupply and strong GCC (Global Capability Centres) expansion ensure a healthy supply-demand balance.

Logistics & Industrial Sector: India Outperforms as the Regional Bright Spot

India’s logistics market remains the strongest in Asia-Pacific, defying flattening rents elsewhere. Sustained demand from manufacturing, e-commerce, and China+1 diversification strategies will drive around 5% rental growth in core hubs like Bengaluru, Mumbai, and NCR in 2026.

Government incentives, infrastructure upgrades, and a skilled workforce position India as a resilient supply chain hub. While China faces vacancy pressures and Australia normalizes post-upcycle, India’s consistent performance underscores its long-term appeal.

Why India Stands Apart Amid APAC Recalibration

The Asia-Pacific region heads into 2026 with a focus on precision over scale—emphasizing ESG compliance, flexibility, and performance. Tim Armstrong, Global Head of Occupier Strategy and Solutions, Knight Frank Asia-Pacific, noted: “In 2026, it won’t be about choosing between cost control and transformation — it will be about delivering both.”

India’s structural strengths—robust domestic consumption, policy stability, and cost competitiveness (rents often under USD 1/sq ft/month)—make it a consolidation hub for multinationals. As global volatility persists, India’s real estate offers clarity, scale, and opportunity in an uncertain world.

Also Read: Indian investors invested USD 335 Mn in Dubai’s Market in H1 2023 (Jan to June) – Vestian

The post India Shines as Asia-Pacific’s Resilient Real Estate Powerhouse Amidst Global Volatility appeared first on Square Feat India.

India’s real estate sector maintained steady growth momentum in 2025 despite geopolitical tensions, global macroeconomic uncertainty, and evolving trade dynamics, supported by strong domestic demand, policy reforms, and sustained infrastructure investment.

“Despite widespread uncertainty, India’s real estate sector demonstrated resilience in 2025. Policy reform, infrastructure growth, and rising income supported stable demand across asset classes,” said Shrinivas Rao, FRICS, CEO, Vestian. “Strong office absorption, steady warehousing activity, and renewed investment flows highlight the sector’s long-term growth trajectory and its expanding role in India’s economic development.”

Economic Stability Provides a Strong Foundation

India continued to register steady economic progress in 2025, underpinned by robust domestic consumption, structural reforms, and ongoing investment in large-scale infrastructure. This stability enabled the real estate sector to sustain activity across office, retail, warehousing, and residential segments, even as global markets remained volatile.

Union Budget 2025–26 Strengthens Real Estate and Infrastructure Push

The Union Budget 2025–26 reinforced the government’s long-term Viksit Bharat vision, with total expenditure rising 7.4% to INR 50.65 lakh crore, placing infrastructure and urban development at the core of economic strategy.

Revised income tax slabs enhanced household disposable income, providing support to housing demand. The allocation of INR 15,000 crore to SWAMIH Fund II for completing one lakh stressed housing units improved liquidity in the affordable housing segment.

In addition, the INR 1 lakh crore Urban Challenge Fund is expected to catalyse institutional-grade city development, while the National Geospatial Mission aims to digitise land records and improve planning transparency. A national framework encouraging states to promote Global Capability Centers (GCCs) in Tier II cities is expected to diversify office demand geographically.

Office Market Hits Record Absorption Levels

The office sector emerged as the strongest performing asset class in 2025. Leasing activity in the first nine months rose 15% year-on-year, with every quarter outperforming the corresponding period in 2024. Annual gross absorption is projected to reach a record 75 million sq ft, the highest ever in a calendar year.

GCCs remained the primary demand driver, accounting for 42% of pan-India absorption in 9M 2025. Bengaluru, Hyderabad, Pune, and NCR led activity. The IT–ITeS sector contributed 39%, while flex operators expanded to 12%, reflecting evolving workplace strategies. BFSI demand moderated to 14%.

Bengaluru, NCR, and Pune accounted for nearly two-thirds of new supply, while Bengaluru, NCR, and Mumbai together contributed 85% of total absorption. ESG considerations remained critical, with green-certified assets comprising 82% of total leasing.

Warehousing and Logistics Remain Stable

India’s warehousing and logistics sector recorded 28.1 million sq ft of absorption in 9M 2025, reflecting a modest 9% year-on-year decline amid temporary softening in the first half.

Bhiwandi alone accounted for nearly 25% of national absorption, reinforcing its status as a leading logistics hub. 3PL players led demand with a 35% share, followed by engineering and manufacturing at 19%. After a subdued first half, e-commerce rebounded strongly in Q3, contributing 23% of quarterly demand.

Rental values strengthened across NCR, Bengaluru, Hyderabad, and Mumbai, registering annual growth between 17% and 47%, while Chennai, Pune, and Kolkata witnessed localized corrections.

Government initiatives such as PM Gati Shakti, the Urban Infrastructure Development Fund, and ongoing GST rationalisation continued to support long-term sector fundamentals.

Retail Leasing Gains Momentum Amid Supply Constraints

Retail leasing activity remained robust through 9M 2025 and is expected to surpass 2024 levels. Rising discretionary spending and stable occupier confidence supported demand for quality retail assets.

Fashion and apparel led leasing, followed by F&B and entertainment, reflecting a growing shift toward experience-driven retail formats. However, limited new supply tightened vacancy levels, keeping mall rentals stable and driving marginal appreciation on high streets.

Housing Market Moderates as Prices Impact Affordability

The residential market witnessed moderation in 2025 as rising prices affected affordability. Sales and new launches crossed three lakh units each in 9M 2025, but unsold inventory rose to nearly six lakh units due to softer absorption.

Despite lower volumes, the value of housing sales increased, driven by sustained demand for premium and luxury homes. Developers increasingly focused on amenity-rich, well-located projects, while prices rose across major cities due to higher construction costs and premium segment demand.

The RBI maintained the repo rate at 5.50%, resulting in marginal reductions in mortgage rates and offering limited relief to homebuyers.

Domestic Capital Anchors Institutional Investments

Institutional investments in Indian real estate stood at USD 4.37 billion in 9M 2025, down 5.5% YoY, primarily due to a subdued first quarter. Investment momentum improved in Q2 and Q3, which together accounted for USD 3.55 billion.

Commercial real estate dominated inflows with a 79% share, supported by strong office leasing. Residential assets attracted 11% of total investments. Domestic investors played a critical role in sustaining momentum, while co-investment structures gained traction among foreign investors amid global uncertainty.

Total institutional inflows are expected to cross USD 6 billion by the end of 2025.

Also Read: Home Prices Keep Rising Even as Sales Slow

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APAC Capital Flows Accelerate as Investors Seek Growth

The report highlights a decisive shift in global capital allocation towards the APAC region. APAC-focused capital raising has jumped over 130% since 2024, now accounting for 11% of global real estate fundraising in the first three quarters of 2025. Investors are increasingly targeting markets with strong economic growth and diversification opportunities.

While established destinations like Japan, Australia, and Singapore remain highly preferred, India has emerged as a key growth market for real estate investment within APAC. Expanding middle-class consumption, digital infrastructure development, and a transparent regulatory framework are positioning the region as an attractive long-term investment hub.

India at the Centre of APAC Investment Strategy

The report underscores India’s rising appeal for large-scale capital deployment across core and alternative real estate assets. Investors are particularly interested in land and development-led opportunities, alongside institutional-quality stock in office, residential, industrial and logistics, and data centre segments.

Institutional investments in India totalled USD 4.3 billion during the first nine months of 2025, driven by steady quarterly momentum. With expectations of strong closures in Q4, annual investment volumes for 2025 are projected at USD 5–7 billion, supported by balanced participation from domestic and foreign investors.

Leadership Commentary

Badal Yagnik, CEO & MD, Colliers India, said:
“Investments in India’s real estate sector have demonstrated remarkable resilience. We foresee annual investments of USD 5-7 billion in 2025 and 2026, driven by robust domestic growth, rising urbanization and expanding infrastructure. Both domestic and offshore capital are expected to accelerate, reinforcing India’s position as a resilient, high-potential market.”

Vimal Nadar, National Director & Head of Research, Colliers India, added:
“Office and residential will continue to dominate investments, while industrial & logistics and alternative assets such as data centres will gain traction. Cross-border capital will remain essential as India strengthens its presence among APAC’s preferred destinations.”

Key Sectors to Drive Investments in 2026

Office & Residential

These segments are projected to contribute nearly 60% of India’s investment activity in 2026, supported by sustained occupier demand and a strong development pipeline.

Industrial & Logistics

Investor focus in APAC is led by the I&L sector, driven by e-commerce expansion. Demand for big-box warehousing, last-mile logistics, and cold-storage facilities continues to rise, particularly in India, Japan, and Australia.

Data Centres

Data centre assets are emerging as a high-growth opportunity in Singapore, Australia, and India, supported by hyperscale demand and digital infrastructure expansion.

Retail & Hospitality

Retail assets are regaining investor confidence as supply stabilizes. Hospitality and student housing are expected to attract capital as tourism rebounds and educational migration rises.

India Strengthens Position as Cross-Border Capital Magnet

The survey finds that 64% of APAC investors expect economic improvement in 2026, and nearly 60% are optimistic about liquidity and rental growth. The growing participation of family offices and high-net-worth investors is expected to intensify competition for high-performing assets.

Summarizing market sentiment, Sam Harvey-Jones, COO, Asia Pacific, Colliers, said:
“Investors are shifting decisively toward stability and opportunity as markets regain footing. Improving fundamentals and normalizing pricing expectations are fuelling optimism for 2026.”

Conclusion

With strong economic fundamentals, deepening institutional-grade supply, and expanding participation from foreign and domestic investors, India is positioned to play a central role in driving APAC real estate capital flows through 2026. A steady rise in demand across office, residential, I&L, and data centre assets is expected to keep momentum firm in the coming year.

Also Read: India Leads APAC Real Estate Investments with 88% Growth in H2 2024

The post Real Estate Investment Momentum in APAC and India to Stay Strong Through 2026 appeared first on Square Feat India.

Vacant Office Stock Rises Amid Robust Demand

As of Q1 2025, Hyderabad leads the nation with a staggering 28 million square feet (Mn sq ft) of vacant office stock, the highest among the top seven cities. This is largely due to the city’s trend of seeing new office space completions surpass absorption for five consecutive years. Despite the steady demand from key sectors like IT, BFSI, and Flex Spaces, a significant pipeline of upcoming office supply in 2025 is expected to push this vacant stock even higher.

Interestingly, across the rest of the country, office leasing activity remained relatively strong, though the total construction activity saw a slowdown of 39% compared to the previous quarter, as well as a 12% decline year-over-year. The overall slowdown can be attributed to a lack of new office supply in cities like Hyderabad and minimal additions in Chennai, Mumbai, and Kolkata.

Absorption and Completions Overview

The first quarter of 2025 saw a notable rise in absorption across the major office markets in India, despite the macroeconomic uncertainties. The pan-India absorption figure rose by 34% compared to the same period in 2024, reaching 17.96 Mn sq ft. This rise was predominantly driven by an uptick in real estate activities in western cities, including Mumbai and Pune.

Here’s a detailed breakdown of the absorption and new completions across the major cities:

City-wise Trends in Absorption and New Completions

• Bengaluru led pan-India absorption with 4.08 Mn sq ft in Q1 2025, followed closely by Mumbai, with 3.99 Mn sq ft. Kolkata saw a notable surge in absorption, increasing by 289% over the previous quarter, but its overall absorption remained at 0.23 Mn sq ft.
• The absorption rate in Pune saw a dramatic rise of 276%, which significantly boosted its share of pan-India absorption, jumping from 5% in Q1 2024 to 15% in Q1 2025.
• Chennai recorded the largest drop in absorption, with a 52% year-on-year decline, resulting in a lower market share of 9% in Q1 2025, down from 25% a year earlier.
• NCR saw a 100% year-on-year increase in new office completions, reaching 2.6 Mn sq ft in Q1 2025.

IT and Flex Spaces Drive Demand

The demand for office spaces in India continues to be predominantly driven by sectors like IT-ITeS, GCCs (Global Capability Centers), BFSI, and Flex Spaces. In particular, Bengaluru dominated the absorption by GCCs, with a 39% share in Q1 2025, which represented significant growth both on a quarter-over-quarter and year-over-year basis.

The impact of artificial intelligence on the IT sector is notable, with IT-ITeS continuing to account for a large share of the absorption activity across major cities.

Conclusion: A Mixed Outlook for India’s Office Market

While overall leasing activity remains strong, the office market in India faces a nuanced picture. Hyderabad’s vacant office stock reflects the challenge of balancing new supply and absorption. With a strong pipeline of office space set to come online in 2025, this dynamic is expected to continue. On the other hand, the increase in absorption, particularly in cities like Bengaluru, Mumbai, and Pune, signals ongoing demand for office space despite broader economic challenges.

As Shrinivas Rao, CEO of Vestian, aptly put it, “Demand for office spaces by GCCs, IT-ITeS, BFSI, and Flex Spaces is expected to swell in the forthcoming quarters, ensuring the growth momentum continues in India’s office market.”

Also Read: Green Building Boom: India’s Real Estate Moves Towards a Greener Skyline

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The report highlights that nearly 60% of occupiers are expected to allocate at least 20% of their office portfolios to flex spaces, with approximately 30% preferring to allocate over 40%. Additionally, 40% of respondents foresee flex spaces becoming central to their core business functions, reflecting a broader acceptance and reliance on this flexible workspace model.

“Flex space offerings are transitioning from niche to mainstream, and are poised to significantly influence Grade A office space demand in India,” said Arpit Mehrotra, Managing Director of Office Services at Colliers India. “Currently, about 60% of occupiers are likely to have a flex share of 20% or more in their office portfolios in the next 3-5 years, up from 40% today. This shift is notable among technology, engineering, manufacturing, and healthcare sectors.”

The report also found that 77% of occupiers prefer longer lease periods of over one year, with flex spaces providing a strategic advantage due to their flexibility and scalability. About 45% of occupiers are looking at core areas in major cities for their future expansion, indicating a preference for central business districts (CBDs) and strategic locations.

Flex spaces are no longer just a solution for start-ups; they are increasingly being used by mid and large-sized companies for core business operations. Around 45% of mid-sized and 35% of large companies are utilizing flex spaces in this capacity, with technology sector occupiers leading the trend at 40%.

“Workspaces have evolved into centers of collaboration and innovation,” noted Vimal Nadar, Senior Director & Head of Research at Colliers India. “With the growing maturity of the flex space market and the availability of enterprise-level services, occupiers are more open to committing to longer terms, potentially reaching up to three years.”

Also Read: Flex Spaces and Sustainability Drive Commercial Property Trends in APAC and India, Colliers Reports

As the landscape of office real estate continues to shift, flex spaces are expected to play a pivotal role in the future of work environments in India, adapting to diverse business needs and contributing to the evolving office market dynamics.

Source: Colliers

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