Colliers’ report, India Office: Setting New Standards for 2025, was released at the FICCI 18th Real Estate Summit and highlights the evolution of India’s commercial real estate from a supply-driven to an occupier-led market. Developers are now focusing on sustainability, energy efficiency, and flexible office spaces to meet evolving tenant needs.

Office Leasing Trends in 2025

India’s top six cities—Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai, and Pune—are expected to drive leasing growth, with Bengaluru leading the market at over 20 million sq ft, followed by Hyderabad and Delhi-NCR at 10-15 million sq ft each.

Projected Office Leasing and Supply in 2025 (Top Cities):

Source: Colliers

New office supply is estimated at 60-65 million sq ft, driven primarily by Bengaluru, Hyderabad, and Delhi-NCR. Vacancy rates across top cities are expected to decline to 15-16% as demand increases.

Sector-Wise Demand: Engineering, BFSI, and Flex Spaces to Lead

The biggest leasing growth is expected in the engineering & manufacturing, BFSI, and flex space sectors, which are projected to account for nearly half of all office leasing in 2025.

Source: Colliers

Bengaluru will see the highest demand from engineering and manufacturing firms, while Mumbai remains a hub for BFSI. Additionally, flex spaces are set to grow significantly, accounting for nearly 20% of total leasing activity in 2025.

Global Capability Centers (GCCs) to Play a Bigger Role

GCCs, which saw 41% growth in 2024, are expected to contribute 25-30 million sq ft in leasing activity in 2025. The top markets for GCCs will continue to be Bengaluru and Hyderabad, with a 70% contribution from US-based companies.

Source: Colliers

Sustainability and REIT Growth to Shape Future Developments

With India’s REIT market gaining traction, developers are focusing on high-quality, sustainable real estate to attract investors and tenants. The adoption of green-certified buildings and energy-efficient designs is expected to accelerate India’s transition to a net-zero carbon economy.

Vimal Nadar, Senior Director & Head of Research, Colliers India, stated:
“India’s commercial real estate is shifting towards high-quality, rent-yielding assets, with developers increasingly prioritizing green-certified buildings. In 2025, an estimated 80-85% of office demand will be concentrated in green-certified developments.”

Shift Towards Sustainability

India’s office real estate sector is set for another strong year in 2025, driven by rising occupier demand, expansion of GCCs, and a shift toward sustainability. With leasing activity expected to remain robust at 65-70 million sq ft, Bengaluru, Hyderabad, and Delhi-NCR will lead the market, while sectors like engineering, BFSI, and flex spaces will drive demand.

As businesses continue expanding and evolving, developers must adapt to an occupier-driven market, ensuring high-quality, flexible, and sustainable office spaces that align with changing workforce needs.

Also Read: Gurgaon office leasing

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Despite this, India’s REIT market remains in its early stages compared to global peers, with only four listed REITs, covering an area of 125 million square feet across the retail and office markets. However, REITs are steadily gaining popularity among both foreign and domestic investors, primarily due to attractive dividend returns. Since their inception, Indian REITs have distributed ₹16,800 crore in dividends, surpassing the entire NIFTY Realty Index in terms of payouts. Yet, despite these better returns, the market capitalization of India’s REITs is still relatively low, accounting for just 13.7% of the total listed real estate sector. This is a stark contrast to more mature markets like the USA (98.9%), Australia (94.8%), and the UK (92.5%).

Among the four listed REITs—Embassy REIT, Mindspace REIT, Brookfield India REIT, and Nexus Select Trust REIT—the returns since inception have varied, with Embassy REIT leading at 24%, followed by Mindspace REIT at 18%, Brookfield India REIT at 6%, and Nexus Select Trust REIT at 39%. However, the BSE Realty Index has significantly outperformed REITs, generating a return of 317% over the past 66 months. Despite this, experts believe that India’s favorable regulatory environment, improved returns on investment, and a growing office market will provide a substantial boost to the REIT sector.

City-wise Breakdown of REIT-Worthy Stock

Vestian’s report also provides a city-wise analysis of the REIT-worthy stock across India’s top seven cities. Bengaluru leads with 33% of the total REIT-worthy office stock, followed by Hyderabad (21%) and NCR (15%). Mumbai and Pune together account for 21% of the REIT-worthy stock, while Chennai holds 10% and Kolkata contributes just 1%.

City Breakdown (in million square feet):

Bengaluru boasts the largest share of REIT-worthy stock, while Hyderabad leads in the proportion of REIT-worthy inventory, with around 74% of its office inventory deemed eligible for REITs. In contrast, Kolkata has the smallest share, with only 24% of its total office inventory qualifying as REIT-worthy.

Sustainability Driving REIT-Worthy Stock

An increasing focus on sustainability is evident, as nearly 67% of India’s REIT-worthy stock is green-certified. Green-certified buildings offer a rental premium of 12-14% over non-green buildings, making them more attractive to investors. These premium rentals translate into higher dividend distributions, enhancing the appeal of REITs in India’s commercial real estate market.

“India’s economic growth has spurred a surge in demand for Grade A office spaces, particularly for flexible and managed offices. While supply remains constrained, developers are focusing on meeting this demand with new projects in the pipeline. With REITs currently holding a small share of the Grade A office market, the growing demand presents a significant opportunity for REITs to expand their footprint and enhance their portfolios, delivering greater value to investors.”
— Amal Mishra, Founder and CEO, UrbanVault

The Future of REITs in India

The future of REITs in India looks promising. As mutual funds and corporations progressively increase their stakes in REITs, several are also planning to launch dedicated schemes focused on REIT performance. This influx of capital is expected to improve the liquidity of REITs, making it easier for them to secure funding at competitive rates.

Additionally, the launch of the SM REIT, which targets smaller value assets, represents a step forward in improving liquidity in the sector. As India’s regulatory environment continues to mature, more REIT listings are expected, including expansion into new real estate segments. With continued government support and favorable policies from SEBI, India’s REIT market is poised for significant growth in the coming years.

In conclusion, while REITs are still in the early stages in India, they are expanding rapidly. The favorable regulatory environment, growing demand for office space, and the focus on sustainability make REITs an increasingly attractive investment tool, offering consistent income and diversification for investors.

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

The post Huge Upside Potential for REITs in India, INR 4.5 Lakh Cr Worth of Prime Office Stock Identified as REIT-Worthy appeared first on Square Feat India.