India’s office market showed a mix of growth and challenges in Q1 2025, with strong demand being offset by a surge in vacant office stock. Among the key findings, one city has emerged as the leader in holding vacant office space, a situation attributed to new completions surpassing absorption for several consecutive years.
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 | Absorption (Mn sq ft) | Y-o-Y Change (%) | Q-o-Q Change (%) | New Completions (Mn sq ft) | Y-o-Y Change (%) | Q-o-Q Change (%) |
|---|---|---|---|---|---|---|
| Bengaluru | 4.08 | 56% | -3% | 3.50 | -5% | 9% |
| Chennai | 1.60 | -52% | -24% | 0.10 | -83% | -91% |
| Hyderabad | 2.66 | 17% | -43% | Negligible | NA | NA |
| Mumbai | 3.99 | 60% | -11% | 0.30 | -70% | -86% |
| Kolkata | 0.23 | 44% | 289% | 0.10 | NA | NA |
| Pune | 2.66 | 276% | NIL | 2.90 | 71% | 26% |
| NCR | 2.73 | 51% | -21% | 2.60 | 100% | 44% |
| Total | 17.96 | 34% | -17% | 9.50 | -12% | -39% |
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.”
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