India’s commercial real estate sector is witnessing robust growth driven by strong leasing demand, institutional investment, and diversification into new asset classes like logistics and data centres. The expansion of tier 2 and 3 cities, along with rising appetite for Grade-A office spaces fueled by IT/ITeS and GCCs, marks a shift towards sustainable, income-generating portfolios underpinned by REITs and digital reforms.
Strong Leasing Momentum and Asset Growth
In Q2 2025, India recorded a gross leasing volume (GLV) of over 21 million square feet across key cities, with Bengaluru leading at 23% share, followed closely by Delhi NCR, Mumbai, and Pune. IT-BPM sectors dominated leasing activity at 34%, along with flexible workspace operators and engineering & manufacturing firms. New office completions reached 12.5 million square feet, supporting ongoing demand and occupier expansion. Despite global economic uncertainties, India’s office market remains resilient with healthy net absorption and steady leasing momentum contributing to a projected record leasing volume exceeding 90 million square feet by year-end.
Tier 2 and 3 Cities Emerging as Key Growth Hubs
Beyond the established metros, tier 2 and 3 cities like Indore, Bhubaneswar, Jaipur, and Lucknow are becoming strategic growth centres. These regions benefit from smart city initiatives, improving infrastructure, and a growing professional work culture that attracts startups and established companies alike. Though infrastructure challenges persist, these cities present significant opportunities for expansion in commercial office space, especially with rising investment flow and government-backed reforms targeting digital governance and approval processes.
Diversification into Logistics and Data Centres
The commercial real estate market is expanding beyond traditional office assets, with industrial and logistics sectors showing high growth supported by e-commerce and 3PL demand. Warehousing space absorption surged by approximately 86% year-on-year in Q2 2025. Similarly, the demand for data centre facilities is escalating sharply in response to growing IT load requirements, with investments and capacity set to multiply through 2030. This diversification is broadening the commercial real estate landscape while offering robust returns and risk mitigation for investors.
Leasing-Driven Growth Supported by REITs and Institutional Capital
Sales transactions still dominate, but long-term leases under REIT vehicles are accelerating rapidly, fueling rental income growth at a significant CAGR. Developers are increasingly retaining assets to build REIT pipelines, reflecting investor preference for stable, recurring income over outright sales. Corporations and SMEs remain the principal occupiers, prioritising ESG-compliant, tech-enabled spaces, while the rise of flexible workspaces further boosts leasing demand.
The FlexInsights Take
India’s commercial real estate sector is poised for transformative growth in 2025, driven by strong demand in IT/ITeS, GCC-led office expansion, tier 2 city emergence, and strategic diversification into logistics and data centres. The evolving investment landscape, marked by increased institutional and REIT participation, signals a maturing market focused on sustained income streams and portfolio resilience. Investors and developers must focus on infrastructure readiness, regulatory reforms, and sustainable building standards to capitalise on this growth trajectory effectively.
