Bengaluru Office Rents Set to Rise by 5-7% in 2025, Driven by IT and AI Research Demand

Bengaluru’s office rents are expected to increase by 5-7% in 2025, primarily due to strong demand from the IT sector and Artificial Intelligence (AI) research, according to Manish Khedia, Managing Director of The Executive Centre, a flexible workspace provider based in Hong Kong.

Growth in IT and AI Research Demand

Bengaluru, known as India’s IT hub, is seeing a rise in demand for office spaces as companies in the IT sector and AI-driven research labs are expanding. According to Khedia, while Bengaluru has already been witnessing high demand from global capability centres (GCCs) over the past year, the recent uptick in demand is specifically coming from IT firms and AI research labs.

The Indian government has been pushing for the establishment of AI research labs, which is contributing to the growing demand for office space in the city. Additionally, sectors like online gaming startups and pharmaceutical companies have also been showing increased interest in office space. These industries are expected to play a significant role in the future of Bengaluru’s flexible workspace sector in 2025.

Rising Office Space Rents

The demand for premium Grade A flexible office spaces in Bengaluru has outpaced supply, resulting in a significant rise in rental prices for such spaces. Khedia pointed out that office rents in Bengaluru’s central business district (CBD) have gone up by 20% since the previous year, particularly in areas with prime locations.

Flexible office spaces, also known as "flex spaces," offer businesses short-term lease options, allowing them to scale their office space up or down based on their needs. These spaces have become more popular with the rise of businesses seeking flexible office solutions in Bengaluru.

Currently, the rental prices for flexible office spaces in Bengaluru range between ₹6,000 to ₹40,000 per seat. Developers offering Grade A spaces typically rent out office seats in the range of ₹15,000-50,000 per seat, especially in the IT corridors and CBD areas.

Shift in Demand Towards Eastern and Northern Bengaluru

One of the most notable trends in Bengaluru’s office space market is the shift towards the eastern and northern parts of the city. Khedia highlighted that the demand for flexible office spaces has surged in the eastern IT corridor, especially in Whitefield. The recent opening of the metro line, which connects key areas of Whitefield to the central business district, has made the region more accessible, leading to increased demand for office spaces there.

However, Khedia also mentioned a noticeable shift in demand towards northern Bengaluru in recent months. Many companies are moving their offices from the saturated central business areas, such as Outer Ring Road, to northern parts of the city. Several new businesses are also launching their operations in the northern regions, contributing to this shift. The availability of office spaces and lower rental prices in the north are attractive factors driving this relocation.

The Executive Centre’s Expansion Plans

The Executive Centre, a major player in the flexible workspace sector, is confident about the growth of the market in Bengaluru and is planning significant expansion in the city. The company plans to add 50 lakh square feet of flexible office space in India by the end of 2025. Khedia stated, “We are targeting to grow at more than 20% every year. While our average space for an office centre used to be between 30,000-50,000 sq ft, we are looking at larger spaces between 50,000-80,000 sq ft. So considering this, we are looking to add close to six centres in India by 2025.”

In terms of geographical expansion, The Executive Centre plans to add new centres in major cities such as Chennai, Bengaluru, Hyderabad, Mumbai, Gurugram, and New Delhi by 2025. Their current portfolio includes 1.5 million square feet of office space, and the company plans to double this footprint to 3 million square feet by 2027.

The Executive Centre has already made substantial investments in Indian cities in the past year. In southern India (Chennai, Bengaluru, and Hyderabad), they invested over ₹47 crore, while ₹42 crore was invested in Gurgaon and New Delhi, and ₹33 crore in Mumbai and Pune.

For 2025, Khedia said that the company plans to continue investing at similar levels, with southern India accounting for around 30% of their overall portfolio share.

Outlook for 2025

As demand from the IT and AI sectors continues to rise, Bengaluru is set to experience further growth in office rents. The surge in flexible office space demand, especially from global IT companies and AI research labs, is expected to push rental prices up by 5-7% in 2025. With the increasing interest in flexible spaces, coupled with new metro infrastructure and expanding business corridors in the city, it is clear that Bengaluru’s office space market will continue to thrive in the coming years.

Overall, the trends in Bengaluru's office space market indicate a thriving, evolving sector that is witnessing a shift towards new locations and growing demand driven by IT and AI industries. The Executive Centre’s significant expansion plans in Bengaluru and other cities further underscore the potential for continued growth and development in the flexible workspace sector.