India’s commercial real estate sector showcased resilience and momentum in the second quarter of calendar year 2025 (Q2 CY25), with Grade A office leasing activity rising 11% year-on-year (YoY) across the top seven cities, reaching 17.8 million square feet (msf). According to the latest report by Colliers, this growth was primarily driven by flexible workspace demand, alongside robust leasing by technology, Banking, Financial Services, and Insurance (BFSI), engineering, and manufacturing sectors.

Despite global macroeconomic uncertainties, India’s office market continues to attract strong occupier interest, especially in Grade A commercial spaces, which are characterized by premium infrastructure, efficient layouts, and environmentally sustainable standards. The leasing surge during Q2 CY25 is a clear indication of corporate India’s long-term commitment to physical office presence, especially in urban economic hubs.

Bengaluru Maintains Lead, Hyderabad and Mumbai See Strong Uptick

Bengaluru, India’s tech capital, maintained its leadership in leasing activity, clocking 4.8 msf of office space transactions during the quarter. This was closely followed by Hyderabad, Mumbai, and Chennai, each of which crossed 2.5 msf in Q2, reinforcing their position as key business hubs.

Interestingly, this upward trend in leasing occurred even as Delhi-NCR, Mumbai, Kolkata, and Hyderabad witnessed a dip in new office supply, which limited options for expansion in these cities and kept vacancy levels in check.

Flexible Workspace Demand Continues to Surge

One of the standout trends in Q2 CY25 was the growing adoption of flexible workspaces, which accounted for 4.3 msf out of the total leased space during the quarter. The co-working and flex-space sector continues to attract occupiers for its cost efficiency, scalability, and speed of deployment, particularly in a post-pandemic era where businesses are increasingly adopting hybrid work models.

In H1 CY25 (January–June 2025), total office demand reached 33.7 msf, marking a 13% rise YoY, which reflects sustained occupier confidence despite ongoing global headwinds such as inflation, geopolitical tensions, and supply chain disruptions. Flexible workspace operators now command a significant share of the leasing pie, attracting not only startups but also large enterprises looking to maintain a hybrid operational presence.

Technology Sector and GCCs Drive Conventional Leasing

The technology sector led the conventional leasing activity, with 6.4 msf of space leased in Q2 CY25, representing a 42% surge compared to the previous year. This growth is largely attributed to Global Capability Centres (GCCs) expanding their operations across India. These centres, established by multinational corporations to deliver IT, R&D, finance, and customer services, have increasingly chosen India for its talent availability, cost advantages, and mature real estate ecosystem.

The rise in GCC-driven leasing underscores India’s growing role as a global hub for digital services and innovation. Notably, Bengaluru, Hyderabad, and Pune remain preferred destinations for GCC expansion, with firms seeking modern, collaborative, and scalable workspace environments.

Supply Growth and Vacancy Trends

Total office space supply in Q2 CY25 grew 11% YoY, reaching 14.9 msf, which helped balance the robust demand. However, the growth in supply was not uniform across cities. While Bengaluru and Chennai saw moderate supply additions, cities like Delhi NCR, Mumbai, Kolkata, and Hyderabad experienced a supply dip, which in turn helped maintain steady rental levels.

The pan-India office vacancy rate held firm at 16.2%, consistent with levels seen in recent quarters. However, Pune and Hyderabad reported slightly higher vacancy rates, mainly due to bulk completions of large office projects. Analysts believe that with leasing momentum sustained, these vacancy levels are likely to taper off in the coming quarters as new space is absorbed.

Outlook for H2 CY25: Continued Growth Amid Optimism

With H1 CY25 already outperforming previous expectations, the outlook for H2 CY25 remains positive, according to market analysts. Several factors point to continued momentum:

• Tech sector resilience: Despite global layoffs and cautious hiring, India’s tech sector is stabilising, with increased focus on AI, cybersecurity, and product development, creating new leasing demand.

• BFSI resurgence: The banking and financial services sector, especially private banks and NBFCs, is expanding its office footprint amid rising credit demand and retail banking push.

• Flex-first strategies: As enterprises embrace agility, hybrid and flex-first strategies are leading to increased demand for modular, plug-and-play office solutions across metros and Tier 1 cities.

Furthermore, foreign institutional investors continue to show interest in India's commercial real estate, particularly in core office assets and REITs (Real Estate Investment Trusts), adding long-term depth and stability to the market.

Regional Insights and City-wise Highlights

• Bengaluru: Highest leasing at 4.8 msf, driven by tech and R&D centres

• Hyderabad: Significant leasing but with high vacancy due to large completions

• Mumbai: Steady demand from BFSI and media sectors

• Chennai: Consistent demand from engineering and automotive companies

• Delhi NCR: Leasing volume impacted by supply constraints but sees increased activity in Gurugram

• Pune: Vacancy spikes temporarily due to project completions

• Kolkata: Lower leasing volumes, but steady interest in CBD areas

Conclusion

The 11% rise in Grade A office leasing in Q2 CY25, combined with a 13% jump in H1 leasing activity, paints a picture of resilience and adaptability in India’s commercial real estate market. Led by flex workspace demand, technology sector expansion, and occupier confidence, the sector is poised for continued growth in the second half of 2025.

As companies adjust to new workplace dynamics, including hybrid work models and decentralised teams, the demand for modern, well-located, and flexible office spaces will only grow. With developers responding to these trends by adding smart, ESG-compliant supply, India’s office leasing market stands at the cusp of a transformative phase, offering strategic opportunities for occupiers, investors, and developers alike.

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