India’s office market saw 34.5M sq ft leasing in H1 2025, led by Bengaluru, NCR, and Pune. Despite new supply, vacancies fell, rentals rose to ₹90.7/sq ft, and co-working gained share. With strong absorption and Tier-2 hubs like Hyderabad driving growth, demand is set to stay robust through 2025.
Growing Leasing Demand and Market Absorption
In the first half of calendar year 2025, India’s office real estate sector showcased impressive growth with a total demand reaching 34.5 million square feet. This upsurge in office leasing activity was primarily led by major cities such as Bengaluru, Delhi-NCR, and Pune, and further supported by Hyderabad’s rising prominence in the co-working sector. According to the CREDAI-CRE Matrix report, even with the addition of approximately 28.8 million square feet of new office space during this period, vacancy levels dropped significantly by 210 basis points, highlighting strong market absorption.
Sectoral Demand Composition and Geographic Shifts
The demand was driven largely by the IT/ITeS sector, accounting for 24% of the leased space, while BFSI and co-working sectors captured 20% and 19% respectively. Hyderabad alone accounted for 29% of the co-working demand—a testament to its growing stature as the nation’s co-working capital. Pune and Hyderabad collectively contributed to over half of the new office stock supply, while Pune and Bengaluru together absorbed 40% of the total leasing demand, signalling a strategic shift to emerging business centres in tier-2 cities.
Rental Trends and Market Pricing
Rental values rose to ₹90.7 per square foot nationally, with key micro-markets witnessing a sustained increase of 4.7% sequentially in Q2 2025. This rental growth reflects strong leasing interest and limited availability in prime urban locations. The overall demand-supply ratio has remained favourable at 1.3 times over the past six quarters, supported by confidence in key sectors including GCCs, BFSI, and the expansion of co-working spaces.
Industry Insights and Future Outlook
Shekhar Patel, President of CREDAI, highlighted that India’s office market is entering a new phase of maturity and expansion, fueled by sectoral diversification and robust rental growth. He emphasised that the strong office absorption supports India’s goal of becoming a $30 trillion economy by fostering resilient commercial real estate growth. Looking ahead, the report expects continued demand stability underpinned by high pre-leasing activity, reduced vacancies, and sustained quality office stock rollouts across tier-1 and emerging cities through the rest of 2025.
FlexInsights Take
The CREDAI-CRE Matrix report underscores a fundamentally positive trajectory for India’s office real estate sector, driven by diversified demand sources and geographic expansion beyond traditional hubs. The fall in vacancy rates despite significant new supply points points to a resilient market adapting well to evolving occupier preferences, including growing GCC and co-working footprints. Rental increases across prime micro-markets highlight the sector’s strong pricing power and occupancy confidence, key indicators of a healthy real estate cycle. With tier-2 cities like Hyderabad and Pune cementing their roles as office space growth engines, the market is positioning itself for sustainable long-term expansion. Investors and developers can take confidence from the balanced demand-supply dynamic and expect continued momentum well into the latter half of 2025. Overall, this paints a bullish picture for India’s commercial real estate as a vital contributor to the nation’s economic scaling ambitions in the near future.
