Surge In Demand Is Set To Boost Country’s Office Leasing Market

Office leasing in the leading markets across the country looks promisingly positive. It remained strong in Q1 2025 at 15.9 million sq.ft, across the top seven markets, reflecting a 15 per cent year-on-year (YoY) increase. With demand outpacing new supply across most cities, average office rentals increased annually by eight per cent during Q1 2025. Amidst limited new supply, growth in rentals was higher in select high activity micro markets such as BKC and Andheri East in Mumbai, SBD (Madhapur, Hitec City, Kondapur and Raidurg) in Hyderabad and NH 48 and Golf Course extension road in Delhi NCR. At least these are the findings from the latest study conducted by Colliers. Significantly, ongoing demand momentum has added credibility to the prevailing optimism in the office market of the country. Bengaluru and Delhi NCR together drove nearly half of the leasing activity during the quarter. While the latter saw its highest quarterly leasing in 10 quarters, Chennai witnessed a remarkable 93 per cent YoY surge at 2.9 million square feet, driven by space take-up by technology firms.

This sustained demand growth underscores the continued resilience of the country’s top seven markets, including Bengaluru, Chennai, Delhi NCR, Hyderabad, Kolkata, Mumbai, and Pune. Going by the Colliers study, 2025 has started on a positive note, with office leasing witnessing a commendable 15 per cent year-on-year growth at 15.9 million square feet in the first quarter. Key markets are seeing strong Grade ‘A’ space uptake, driven by corporate expansions, rising investments in commercial real estate, amidst promising domestic growth prospects. The demand momentum is likely to gain pace all through the year due to expansionary plans of leading firms across technology, engineering and manufacturing and BFSI sectors. Additionally, backed by a vibrant policy push in major states, long-term demand for GCCs will continue to remain strong in most of the country’s Tier I and select Tier II cities. However, when it comes to the supply side, overall new supply touched 9.9 million square feet during Q1 2025, which is almost at par with the corresponding period last year. Bengaluru and Delhi NCR together drove two-third of the new supply during Q1 2025.

While a majority of the markets saw a decline in new supply on an annual basis, Delhi NCR and Pune witnessed multifold growth in new completions, as compared to Q1 2024. In fact, almost 90 per cent of the new supply during Q1 2025 was concentrated in three cities – Bengaluru, Delhi NCR and Pune. When it comes to the demand side, of the 15.9 million square feet of Grade ‘A’ office space demand in Q1 2025, 86 per cent came from conventional workspaces. Flex space leasing, meanwhile, at 2.2 million square feet witnessed a 22 per cent YoY growth. Technology sector continued to drive office space demand, leasing 4.4 million square feet of conventional office space during Q1 2025, 28 per cent of the total demand during the quarter. BFSI and engineering and manufacturing demand was also healthy at 3.4 million square feet and 2.4 million square feet, together accounting for 36 per cent of the total conventional space uptake in the quarter. If this trend continues, that would certainly reflect overall positive business sentiment, going forward.