India’s commercial office market is entering a stronger growth cycle, with vacancy levels falling to 12.9% across the top seven cities. Despite a slight decline in leasing activity during Q2 2026, healthy demand from IT, BFSI, flexible workspace operators, and GCCs continues to support rental growth and long-term market stability.
India’s commercial real estate sector is witnessing tighter market conditions as office vacancies continue to decline across major business hubs. According to a recent Nuvama Institutional Equities report, the vacancy rate across the country’s seven largest office markets stood at 12.9% in Q2 2026, representing a 190-basis-point decline compared to the same period last year.
The report notes that “office vacancies are falling while rental rates are on a steady upward trajectory,” reflecting the growing demand for quality commercial spaces. As available Grade A office inventory becomes more limited, landlords are expected to gain greater pricing power, supporting rental appreciation across key office markets.
Leasing Activity Remains Healthy Despite Short-Term Slowdown
While the overall market remained resilient, leasing activity experienced a temporary slowdown during the second quarter. Gross office leasing declined 3% year-on-year to 20.6 million square feet, while net absorption dropped 19% to 11.1 million square feet.
Analysts attribute this moderation largely to global geopolitical uncertainty, particularly tensions involving the US and Iran, which prompted some businesses to postpone office expansion decisions. However, the report emphasises that these delays are temporary and do not indicate weakening long-term demand. Instead, companies continue to evaluate expansion opportunities while maintaining a cautious approach amid global economic volatility.
Bengaluru, NCR and Mumbai Continue to Lead
Bengaluru once again emerged as India’s strongest office market, accounting for 31% of total leasing demand and 53% of all new office supply during the quarter. The city also recorded the lowest vacancy rate among major metros at 8.7%, reinforcing its leadership as the country’s preferred destination for multinational occupiers.
The National Capital Region (NCR) also achieved a significant milestone by recording its lowest office vacancy level since 2012, while the Mumbai Metropolitan Region (MMR) saw vacancy decline to 8.9%. Together, these markets continue to attract occupiers seeking premium office developments with modern infrastructure, strong connectivity, and access to skilled talent.
Demand remained well diversified across industries. IT and Business Process Management (BPM) companies contributed 22% of total leasing, followed by flexible workspace operators at 20% and financial services firms at 19%. Global Capability Centres (GCCs) also played a major role, accounting for approximately 38% of total gross leasing, further strengthening demand for Grade A office assets.
Supply Pipeline to Shape the Next Growth Phase
Looking ahead, India’s office market is expected to add nearly 171 million square feet of new commercial supply by 2028, with annual completions projected between 55 million and 60 million square feet.
Industry experts believe this upcoming supply is likely to remain balanced with occupier demand, reducing the risk of oversupply while supporting healthy rental growth. Going forward, developers, investors, and occupiers will closely monitor the pace of project completions and continued expansion by multinational corporations. If demand from GCCs, technology firms, and flexible workspace operators remains consistent, India’s commercial office market is well positioned to sustain its current momentum and deliver steady rental growth over the coming years.
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