India’s Office Market Sees Steady Leasing Demand Amidst Dip in New Supply in Q1 2025: Cushman & Wakefield Report

India’s commercial real estate sector began 2025 with a mixed performance, as new office space completions fell short of expectations, even as leasing activity remained strong. According to the latest report by Cushman & Wakefield, the total new office space completions in Q1 2025 stood at 10.7 million square feet (msf), marking a 13% year-on-year (YoY) decline and a significant 27% drop quarter-on-quarter (QoQ). This slowdown has been primarily attributed to project delays and occupancy certification bottlenecks.

Despite the overall decline in completions, three cities—Bengaluru (3.28 msf), Pune (3.21 msf), and Delhi-NCR (2.71 msf)—dominated the new supply landscape, jointly contributing 86% (9.2 msf) of the total completions for the quarter. Hyderabad followed with 1.32 msf, while Mumbai saw a subdued addition of only 0.18 msf. Other major markets like Chennai, Kolkata, and Ahmedabad recorded no new supply during the quarter, leading to tightening vacancy levels and escalating rental values in these regions.

Vacancy Rates Drop Across Major Markets Amid Supply Crunch

With new supply limited, the overall vacancy rate across the top eight Indian office markets dropped by 55 basis points (bps) to 15.7%, compared to 16.25% in Q4 2024. Among the cities, Mumbai saw the steepest QoQ vacancy decline, down by 227 bps, followed by Kolkata, which witnessed a 140-bps drop. All major cities, barring Bengaluru and Pune, reported a decrease in vacancy rates, highlighting the impact of constrained supply amid sustained occupier demand.

Commenting on the broader outlook, Anshul Jain, Chief Executive, India, SEA & APAC Tenant Representation at Cushman & Wakefield, said, “While we remain watchful of evolving global economic conditions, India’s position as a global hub for technology, R&D, and innovation is becoming stronger. The impressive performance of Global Capability Centres (GCCs), which now account for over 30% of gross leasing, reflects continued confidence in India’s business environment. We anticipate this growth trajectory to continue, supported by new greenfield projects and expansion plans.”

Leasing Activity Holds Strong, Led by Fresh Deals and Tech Hubs

In contrast to the decline in supply, leasing activity remained robust. The gross leasing volume (GLV) for Q1 2025 reached 20.3 msf, representing a 5% YoY increase. This figure aligns with the average quarterly GLV over the past two years, underscoring market stability. Notably, fresh leasing—comprising new deals instead of renewals—contributed nearly 80% of the total activity for the third consecutive quarter, a strong indicator of expansionary trends among occupiers.

Bengaluru and Mumbai emerged as the leasing frontrunners, with 4.86 msf and 4.31 msf, respectively. These were followed by Pune (3.49 msf), Delhi-NCR (2.75 msf), Hyderabad (2.59 msf), and Chennai (1.97 msf). Meanwhile, Kolkata and Ahmedabad reported more modest leasing volumes at 0.26 msf and 0.07 msf, respectively.

GCCs and IT-BPM Drive Sectoral Demand as Net Absorption Hits High

On the absorption front, net absorption rose 20% YoY to 13.4 msf, marking the third-highest quarterly figure ever recorded. Delhi-NCR, Mumbai, and Bengaluru were the primary contributors, jointly accounting for 63% of the total net absorption. Pune, in particular, had a record-breaking quarter, while Delhi-NCR recorded its best absorption performance since Q4 2019.

The report also highlighted sectoral leasing patterns, with the IT-BPM sector leading at 29% of GLV, followed by Banking, Financial Services, and Insurance (BFSI) at 22%, and flex space operators maintaining a consistent 13% share. GCCs continued to expand their footprint, growing their share from 28% in 2024 to 31% in Q1 2025. Bengaluru accounted for 37% of all GCC-related leasing activity, with Pune and Hyderabad also posting strong gains.

Despite supply-side constraints, the report maintained a positive outlook for India’s office market, forecasting that the continued demand momentum will keep vacancy rates tight and drive stable rental growth in core markets throughout 2025.