India Sets Record for Office Leasing

Companies and multinational corporate centres leased approximately 43 million square feet of office space across India during the first half of 2026, the highest January-to-June volume on record. Demand is continuing to outpace the delivery of quality buildings, vacancy has fallen to its lowest post-pandemic level and rents are increasing across every major office market.

Office leasing reached 43 million square feet

Gross leasing volume across India’s eight largest office markets reached approximately 43 million square feet in the first half of 2026. The total increased by 5% from the corresponding period of 2025 and set a new first-half record.

Cushman & Wakefield defines gross leasing volume as new take-up, open-market renewals and pre-leasing in buildings that may still be under construction. The measure captures total transaction activity but does not represent the net addition to occupied space.

Companies completed about 21 million square feet of transactions during the second quarter. The quarterly result was 1% lower both year on year and from the first three months of 2026. The slight moderation did not alter the broader picture, as the combined first-half result remained the strongest ever recorded.

The market had already generated 21.9 million square feet of gross leasing in the first quarter, an annual increase of 13%. Mumbai, Bengaluru and Hyderabad led activity, while new Grade A completions fell to their lowest level in seven quarters.

Global capability centres became the principal demand engine

Global capability centres are internal multinational units that provide software development, data analytics, finance, engineering, cybersecurity, human resources and other services to operations in multiple countries.

These centres leased about 16.5 million square feet during the first half of 2026, approximately 38% more than a year earlier. Their share of total activity reached 38%. During the second quarter alone, capability centres completed transactions covering almost 8 million square feet and represented 37% of leasing.

Some market studies place the segment’s share as high as 45% within Grade A offices. The difference reflects methodology, including the cities, building classes and transaction types covered. Some consultants measure all gross leasing, including renewals and pre-commitments, while others focus on selected premium-office segments.

The expansion reflects a shift in India’s role within multinational companies. Many centres were initially established mainly to reduce the cost of routine support functions. Newer operations increasingly work on product development, artificial intelligence, digital transformation, engineering design and global business management.

This change is raising real-estate requirements. Occupiers need reliable power, high-speed telecommunications, backup systems, strong security, environmental certification and access to transport rather than simply inexpensive desks.

Bengaluru retained its leadership in technology operations

Bengaluru remained the largest market for global capability centres, with 5.36 million square feet of leasing in the first half. Pune followed with 3.01 million, the Delhi National Capital Region with 2.37 million and Mumbai with 2.23 million.

Hyderabad attracted 1.63 million square feet from capability-centre occupiers, while Chennai recorded 1.5 million. Bengaluru, Pune, Delhi NCR and Mumbai together generated close to 80% of the segment’s total demand.

The geographic footprint is gradually broadening. Companies assess the availability of engineers, analysts, accountants, data specialists and finance professionals as well as rents. Rising costs and tighter talent markets in established technology centres are encouraging occupiers to examine Chennai, Kolkata, Ahmedabad and other alternatives.

A cheaper city does not automatically produce a lower total operating cost. Employers also consider transport, electricity reliability, international air connections, office readiness, staff turnover and the ability to expand a team quickly.

Mumbai recorded the strongest growth among major cities

Mumbai generated the largest overall gross leasing volume in the first half of 2026. Transactions reached 10.7 million square feet, 30% more than a year earlier. Bengaluru followed closely with 10.3 million and annual growth of 7%.

Delhi NCR declined by 16% to 6.9 million square feet. Pune recorded 5.3 million, down 3%, while Hyderabad increased by 25% to 5.2 million.

Chennai fell by 29% to 2.9 million square feet. Kolkata remained near 800,000 square feet, while Ahmedabad more than tripled its volume from 200,000 to 800,000 square feet.

Large percentage changes in smaller markets require caution. One or two major leases can transform a city’s annual comparison without making its absolute scale comparable with Bengaluru or Mumbai.

One of the largest second-quarter transactions was Volvo Group’s lease of about 600,000 square feet at Bagmane Capital South in Bengaluru. The commitment shows that international manufacturers are continuing to expand long-term engineering and technology operations in India.

Technology no longer dominates the market alone

Information technology and business-process management remained the largest source of demand but accounted for only 22% of first-half activity. Banking, financial services and insurance generated 19%, while engineering and manufacturing companies contributed 16%.

A broader occupier mix reduces the office market’s dependence on the investment cycle of a single industry. In earlier periods, spending reductions by major technology companies could quickly affect leasing in Bengaluru, Hyderabad and Pune. Banks, vehicle manufacturers, pharmaceutical companies, consultants and engineering groups are now providing additional demand.

Diversification does not eliminate external risks. A large share of new space is tied to investment decisions by multinational corporations that could be revised during a global recession, trade conflict, tax-policy change or accelerated automation of office functions.

Artificial intelligence has a mixed effect. It encourages the creation of engineering and research teams while also enabling companies to automate work previously performed by large operational units. Future space demand may therefore depend more on the complexity of jobs than on simple headcount expansion.

Flexible workspace operators set a record

Flexible and managed workspace operators leased 8.4 million square feet in the first half of 2026. The total increased by 55% year on year and was the segment’s highest-ever half-year result.

Flexible operators accounted for approximately one-fifth of total office transactions. Companies use managed space to launch teams quickly, test a city before signing a conventional long-term lease and house employees while permanent premises are being completed.

The model can shorten the launch period for a new capability centre. The operator leases the building, completes the fit-out and provides furniture, connectivity, security and property management. The corporate client receives ready-to-use offices and can adjust its footprint more easily.

The segment creates a different form of risk for building owners. The formal tenant is the workspace operator, while underlying demand is spread among many clients. If occupancy falls sharply, the operator may be left with long obligations to landlords and shorter agreements with customers.

Office vacancy declined to 13.7%

Average vacancy across the eight largest cities fell to 13.7% in the second quarter. This was the lowest post-pandemic level and the twelfth consecutive quarter of vacancy compression.

The decline resulted from sustained leasing and slower project completion. Developers delivered about 21 million square feet during the first half, 10% less than in the corresponding period of 2025.

Second-quarter completions increased by 40% from the first three months of the year to approximately 12 million square feet. A number of projects are still awaiting final approvals or fit-out completion.

More than 35 million square feet may enter the market during the second half of 2026. The pipeline could increase occupier choice, but its actual effect will depend on project quality, location and delivery dates.

A large national construction figure does not guarantee balance. Companies need buildings in specific business districts near transport and talent. A new project on the edge of one city cannot resolve a shortage in a highly demanded district elsewhere.

Net absorption slowed because supply was constrained

Net absorption, which measures the actual change in occupied space after allowing for movements between buildings, reached approximately 23 million square feet during the first half. The figure was almost 20% lower than a year earlier.

Second-quarter net absorption stood at 11.6 million square feet, broadly matching the first quarter but declining by 14.5% year on year.

Lower net absorption alongside record gross leasing does not necessarily indicate market weakness. A tenant may renew a lease, move between buildings or pre-lease a property that has not been completed. Such transactions increase gross volume but may not immediately add to occupied stock.

Limited ready supply is another constraint. A company can sign an agreement today but occupy the building only after construction and interior work are completed.

Bengaluru generated almost 30% of national net absorption during the first half. Pune and Hyderabad each contributed about 15%, confirming continued expansion in the country’s principal technology and engineering markets.

Rents increased across every major market

Falling vacancy gave landlords greater pricing power. Office rents increased across all major cities during the second quarter. Chennai, Mumbai, Hyderabad and Ahmedabad recorded the strongest quarterly appreciation at approximately 2–3%.

Higher rents improve the economics of new development and may redirect capital towards commercial projects. Many developers had previously prioritised residential construction, where rapid price gains and advance sales offered more predictable returns.

An office project requires significant upfront expenditure and depends on long-term tenancy. Developers must account for land, borrowing, construction, common-area fit-out, environmental performance and operating costs. Projects are delayed when achievable rents do not compensate for those expenses.

Excessive rent growth can also change occupier behaviour. Companies may reduce space per employee, choose peripheral districts, use managed offices or distribute teams across several cities.

Active space requirements reached 80 million square feet

Companies are actively evaluating requirements covering approximately 80 million square feet. The figure does not mean that the entire volume will become signed leases, as occupiers may examine several cities and buildings simultaneously or revise their schedules.

The scale nevertheless indicates that demand for quality offices remains greater than availability in several key districts. Tenants are beginning negotiations well ahead of expected occupation dates.

Pre-leasing reduces development risk because part of a building is committed before completion. It gives the occupier access to the required space but also introduces construction risk if approvals or building work are delayed.

Insufficient ready supply could constrain the next phase of capability-centre growth. Multinationals compare India with Poland, Romania, the Philippines, Malaysia, Mexico and other destinations offering skilled workers and international infrastructure. Office cost and delivery times form part of that comparison alongside wages and taxation.

Office assets are attracting more institutional capital

Institutional investment in Indian real estate reached $1.9 billion during the second quarter of 2026. First-half investment totalled $3.5 billion, an increase of 6% year on year. Offices were the preferred asset class, ahead of data centres and mixed-use developments.

Investor interest is supported by strong leasing, lower vacancy and the expansion of real estate investment trusts. These vehicles allow investors to own shares in portfolios of leased properties and receive part of their cash flow without purchasing buildings directly.

Domestic capital remained an important driver, while multi-city portfolios, Bengaluru and Chennai attracted particular attention.

The growth in capital does not imply equal returns for every property. Modern offices in established business districts with strong tenants and high occupancy are best placed to benefit. Older buildings without environmental certification, backup power or transport access can lose demand even during an expanding market.

Record demand could create a new supply imbalance

India’s office market contrasts with the United States and parts of Europe, where remote work has left persistent high vacancy. Indian capability centres are adding teams, while employers more frequently use offices as the primary workplace or require regular employee attendance.

Hybrid work has not disappeared. It is changing layouts, desk density and demand for shared facilities. Companies may need fewer dedicated workstations but more meeting rooms, laboratories, collaboration areas and technology-enabled spaces.

The immediate risk is insufficient supply. Continued delays would increase rents and push some occupiers into peripheral districts or alternative cities. A second risk could emerge later if developers launch too many projects at the same time and complete them after the current corporate expansion cycle has weakened.

As International Investment experts report, record leasing confirms India’s transition from a destination for low-cost support functions into a central global location for corporate technology, engineering and financial services. Gross leasing should not, however, be treated as pure market expansion because it includes renewals, relocations and commitments to buildings that are not yet complete. Falling vacancy supports rents and investment but also increases occupier costs and the risk of a delayed construction boom. Long-term market stability will depend on whether developers can deliver quality offices near transport and skilled labour without creating excess supply after the present cycle has passed.