‘Office Market Records 7 Straight Quarters of Vacancy Decline Amid Limited Supply’

Gurugram, April 23, 2025: India’s office real estate market maintained its upward trajectory in Q1 2025, driven by robust leasing and tight new supply, pushing overall vacancy down for the seventh consecutive quarter to 15.7 per cent – a cumulatively steep drop of 275 basis points (bps) from 18.45 per cent in Q2 2023. According to Cushman & Wakefield’s latest Q1 2025 Office Market Report, supply constraints and strong occupier demand in the first quarter of the year across India’s top 8 office markets have resulted in a drop-in vacancy rate by 55 basis points (bps) to 15.7 per cent from 16.25 per cent in Q4 2024.

According to the report, total new office completions in Q1 2025 stood at 10.7 million square feet (MSF), falling short of expectations due to delays in occupancy certifications and project timelines. This is a drop of 13 per cent year-on-year and 27 per cent quarter-on-quarter. Bengaluru (3.28 MSF), Pune (3.21 MSF), and Delhi-NCR (2.71 MSF) contributed a combined 86 per cent (9.2 MSF) of this new supply. Hyderabad saw a supply of 1.32 MSF, while Mumbai registered supply of 0.18 MSF.

Cities like Chennai, Kolkata and Ahmedabad recorded no new supply, resulting in lower vacancy rates and higher rentals in these markets. Despite the new additions, low supply in most markets tightened vacancies further. Mumbai saw the steepest drop-in vacancy rates—falling by 227 bps quarter-on-quarter while Kolkata followed with a 140-bps dip. Most cities, except Bengaluru and Pune, reported a decline in vacancy as supply lagged behind demand.

Meanwhile, office leasing activity remained strong in the first quarter with gross leasing volume (GLV) across the top 8 markets reaching 20.3 MSF, a 5 per cent increase YoY and in line with the two-year average of 20 MSF per quarter. Fresh leasing made up nearly 80 per cent of the activity—marking the third consecutive quarter of this trend and pointing to sustained occupier expansion.

Gross leasing volume, which factors in all leasing activity in the market, including fresh take-up, open market renewals by corporates as well as pre-leasing, is an indication of overall market activity. Bengaluru (4.86 MSF) and Mumbai (4.31 MSF) led the leasing activity, followed closely by Pune (3.49 MSF). Delhi NCR, meanwhile, recorded 2.75 MSF of leasing activity while Hyderabad witnessed 2.59 MSF and Chennai 1.97 MSF. Kolkata and Ahmedabad saw leasing volume of 0.26 MSF and 0.07 MSF respectively.

Notably, pre-commitments surged, more than doubling QoQ, reflecting increased occupier confidence in the market and project pipelines. Net absorption, a key indicator of real estate demand in terms of expansion of occupied space in the market, stood at 13.4 MSF in Q1 2025, the third highest quarterly figure ever with a growth of 20 per cent YoY.

Delhi-NCR, Mumbai, and Bengaluru collectively contributed 63 per cent of this total, with Pune achieving its highest-ever quarterly net absorption. Delhi-NCR, meanwhile, recorded its strongest net absorption since Q4 2019.

In terms of sectoral demand, the IT-BPM sector retained its position as the largest occupier, accounting for 29 per cent of GLV. BFSI followed at 22 per cent, while flex space operators maintained a steady 13 per cent share. Global Capability Centres (GCCs) grew their share to 31 per cent, up from 28 per cent in 2024. Bengaluru accounted for 37 per cent of GCC leasing, with Pune and Hyderabad recording significant quarter-on-quarter growth.

Tight supply and strong demand pushed rental values upward, particularly in high-demand markets. Mumbai posted a sharp 10 per cent QoQ increase in average rents—the highest among the top 8 cities—while Hyderabad, Ahmedabad, Delhi-NCR, and Chennai saw growth in the range of 2–4 per cent QoQ.

Anshul Jain, Chief Executive, India, SEA & APAC Tenant Representation, said: “The momentum in India’s office sector has carried into Q1 2025, supported by steady closures of large deals and robust fresh leasing activity. The continued commitment of global occupiers to expand operations here signals enduring confidence in India as a strategic business destination. While we remain watchful of evolving global economic conditions, India’s position as the global hub for tech, R&D, and innovation continues to strengthen. The strong performance of the GCC segment—now contributing over 30 per cent of gross leasing—underscores this confidence, and we expect this trajectory to continue with more greenfield entries and expansion mandates. Additionally, domestic economic factors like easing inflation and anticipated rate cuts will further support occupier activity. With a resilient demand base, rising flex uptake, and healthy supply additions in key micro-markets, we anticipate the office market will maintain its growth footing in the quarters ahead.”

Veera Babu, Executive Managing Director, Tenant Representation, added: “2025 began on a strong note, underpinned by robust market fundamentals, marking the fourth consecutive quarter with office demand exceeding 20+ MSF. GCCs remained the primary driver of this momentum, accounting for over 31 per cent of total leasing activity. New completions were lower than the previous quarter, but supply is expected to gain traction in the coming months. Meanwhile, vacancy rates have continued to decline, reaching a four-year low of 15.7 per cent. With over 40 MSF of active demand in the pipeline, we anticipate increasing competition for space across core markets in all major cities. The shortage of prime, centrally located, high-quality office space is likely to continue, impacting occupiers over the next 3-4 quarters.”