The office real estate market vacancies fell to 15.7% in the first quarter (Q1) of the current year, marking the seventh consecutive quarter of decline, according to a report by global commercial real estate services firm Cushman & Wakefield.
This decline represents a drop from 18.45% in the second quarter of 2023 (Q2 2023). As per the latest Q1 2025 Office Market Report, supply constraints and strong occupier demand in the first quarter of the year across India’s top 8 office markets have resulted in a drop-in vacancy rate by 55 basis points (bps) to 15.7% from 16.25% in Q4 2024.
According to the report, total new office completions in Q1 2025 stood at 10.7 million sq. ft. (MSF), falling short of expectations due to delays in occupancy certifications and project timelines. This is a drop of 13% y-o-y and 27% q-o-q. Bengaluru (3.28 MSF), Pune (3.21 MSF), and Delhi-NCR (2.71 MSF) contributed a combined 86 per cent (9.2 MSF) of this new supply.
Anshul Jain, Chief Executive, India, SEA & APAC Tenant Representation, said, “With a resilient demand base, rising flex uptake, and healthy supply additions in key micro-markets, we anticipate the office market will maintain its growth footing in the quarters ahead.”
What Else For Real Estate?
Hyderabad saw a supply of 1.32 MSF, while Mumbai registered a supply of 0.18 MSF. Cities like Chennai, Kolkata and Ahmedabad recorded no new supply, resulting in lower vacancy rates and higher rentals in these markets, the report added.
Despite the new additions, low supply in most markets tightened vacancies further. Mumbai saw the steepest drop-in vacancy rates–falling by 227 bps quarter-on-quarter (q-o-q)–while Kolkata followed with a 140-bps dip. Most cities, except Bengaluru and Pune, reported a decline in vacancy as supply lagged behind demand.
Meanwhile, office leasing activity remained strong in the first quarter with gross leasing volume (GLV) across the top 8 markets reaching 20.3 MSF, a 5% increase y-o-y and in line with the two-year average of 20 MSF per quarter. Fresh leasing made up nearly 80% of the activity–marking the third consecutive quarter of this trend and pointing to sustained occupier expansion.
Gross leasing volume, which factors in all leasing activity in the market, including fresh take-up, open market renewals by corporates as well as pre-leasing, is an indication of overall market activity. In terms of sectoral demand, the IT-BPM sector retained its position as the largest occupier, accounting for 29 per cent of GLV. BFSI followed at 22%, while flex space operators maintained a steady 13% share.
Global Capability Centres (GCCs) grew their share to 31%, up from 28% in 2024. Bengaluru accounted for 37% of GCC leasing, with Pune and Hyderabad recording significant quarter-on-quarter growth.
Tight supply and strong demand pushed rental values upward, particularly in high-demand markets. Mumbai posted a sharp 10% QoQ increase in average rents–the highest among the top 8 cities–while Hyderabad, Ahmedabad, Delhi-NCR, and Chennai saw growth in the range of 2-4% q-o-q, the report added.
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