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.

India set a half-year investment record

Equity capital inflows into Indian real estate reached $8.5 billion in the first half of 2026, the highest figure recorded for any six-month period, according to CBRE South Asia’s India Market Monitor — Investments. The total was 32% higher than in January–June 2025.

The record followed a particularly strong first quarter, supported by acquisitions of completed offices, development sites and activity involving real estate investment trusts. Second-quarter inflows stood at $3.4 billion and were broadly unchanged from the corresponding period of 2025.

The six-month total is already equivalent to almost 60% of the record $14.3 billion invested during the whole of 2025. Last year’s inflows rose by 25%, with offices, residential sites, mixed-use developments, warehouses and data centres supporting activity.

Land and offices received 94% of capital

Land and development-site acquisitions together with completed office properties accounted for approximately 94% of second-quarter equity inflows. Investors were therefore financing both future construction and buildings capable of generating immediate rental income.

More than 88% of the money invested in land was intended for residential and office development. The remainder went into data centres, mixed-use schemes, industrial property and logistics facilities.

Major Indian developers are replenishing their land pipelines in rapidly expanding metropolitan areas. The strategy creates capacity for future launches but also increases exposure to land prices, planning delays and changes in end-user demand.

Domestic investors supplied 92%

Indian investors provided about 92% of all equity inflows during the second quarter, leaving global capital with an approximately 8% share. Developers accounted for 34% of deployment, followed by domestic institutional investors at 32%. Together, the two groups generated about two-thirds of quarterly investment.

The structure differs from earlier cycles in which major transactions frequently relied on Canadian pension funds, US asset managers and Singaporean capital. India’s market is now able to sustain high investment activity even when cross-border institutions remain cautious.

A strong domestic capital base reduces immediate dependence on global interest rates and international fundraising. It also concentrates more risk inside India, including on the balance sheets of developers, domestic funds and financial institutions.

CBRE expects selected foreign investors to increase participation during the second half as global conditions stabilise. International and local players continue to seek opportunities across property types.

Bengaluru, Delhi-NCR and Mumbai took 60%

Bengaluru attracted the largest amount of capital during the second quarter, followed by Delhi-NCR and Mumbai. The three metropolitan markets together accounted for almost 60% of total inflows.

Bengaluru benefits from its large technology sector, expanding global capability centres and sustained demand for modern offices. International companies continue to locate software development, analytics, engineering and financial operations in the city.

Delhi-NCR combines housing development, the office districts of Gurugram and Noida, industrial infrastructure and large land transactions. Mumbai remains the country’s financial capital and a principal market for premium property, completed offices and institutional portfolios.

Capital concentration in the three gateway markets improves liquidity and gives investors more potential exit routes. High land values, infrastructure constraints and lengthy approvals can nevertheless reduce investment returns.

Offices returned to the centre of investment

The office sector has returned as a primary investment target after the uncertainty created by remote working. CBRE attributed the strong first quarter mainly to increased deployment into completed office assets.

Demand is supported by global capability centres, Indian technology companies, flexible-office operators and international corporations expanding their service operations.

Investors favour Grade A buildings with stable tenants, long leases and the potential to be transferred into listed real estate investment trusts.

Offices also form the foundation of India’s REIT market. The market capitalisation of the country’s five listed trusts reached INR 1.726 trillion by the first nine months of FY2026, more than six times the level recorded when the first REIT was listed in FY2020.

Approximately 42% of India-based participants in CBRE’s investor survey identified offices as their preferred sector. Value-add and core-plus approaches were favoured, indicating that capital is increasingly focused on improving occupancy and buildings rather than simply collecting rent.

New platforms were valued at $1.6 billion

Investors and developers established investment and development platforms worth approximately $1.6 billion during the second quarter, principally in residential and office property.

A platform differs from the acquisition of one building. A capital partner and developer agree to finance a pipeline of future projects, releasing funds as land is acquired and development milestones are reached.

The format gives an institutional or international investor access to local operating expertise. The developer receives a longer-term source of equity and can expand its project pipeline more quickly.

An announced platform value does not necessarily mean that the entire sum has already been transferred. Part of the amount may consist of commitments that will be deployed only when qualifying projects are found.

Competing reports use different definitions

CBRE’s $8.5 billion estimate is considerably higher than the figures published by other consultancies. The difference does not necessarily represent a contradiction because each company measures a different investment universe.

Cushman & Wakefield estimated institutional real estate investment at $3.5 billion in the first half of 2026, an annual increase of 6%. Its second-quarter total was $1.9 billion, led by offices, data centres and mixed-use assets.

Savills concentrates largely on private equity transactions. It recorded $1.2 billion in the first quarter, up 66% year on year. Offices received 41% of that investment, hospitality 17%, and domestic investors supplied 66%.

CBRE uses a broader equity-capital category that includes developers, institutional organisations, REIT-related activity and certain development platforms. Its number should not be compared directly with a private equity or institutional-only total.

The record is not $8.5 billion of foreign investment

Descriptions of “investment into India” may imply that the entire amount came from overseas funds. In the second quarter, approximately nine out of every ten investment dollars came from domestic participants.

The figure is also not the value of homes purchased by consumers, bank lending, mortgages or all property completed during the period. It represents equity invested in companies, projects, sites, platforms and completed assets.

Equity does not require fixed interest payments in the same way as debt, but investors receive ownership and a share of future profits. It can reduce leverage for a developer while transferring part of the future appreciation to the capital partner.

Residential development remains important

More than 88% of investment into land and development sites was directed towards residential and office projects. Developers are building pipelines to benefit from urbanisation, rising incomes and migration towards major employment centres.

Institutional investors tend to select larger developers that can secure approvals, market projects and comply with India’s Real Estate Regulation and Development Act.

Capital is gradually concentrating among companies with recognised brands and stronger balance sheets. That can improve transparency while making it harder for smaller regional developers to compete for institutional funding.

The principal risk is that land appreciation outpaces household income. When developers pass higher site costs to buyers, housing affordability can deteriorate even as construction increases.

Data centres are becoming a distinct asset class

Part of the capital outside conventional housing and offices went into data-centre infrastructure. Demand is being supported by cloud services, digital payments, e-commerce and artificial intelligence.

Data centres require greater capital intensity than ordinary offices or warehouses. Projects must fund power connections, backup systems, cooling, telecommunications and physical security.

CBRE expects capital to continue expanding into data centres, flexible offices, healthcare, hospitality and residential platforms. Improved exit visibility through public markets and investment trusts is making these sectors more suitable for long-term investors.

The main physical constraint is dependable electricity. New data-centre campuses must compete with housing, transport and industry for available grid capacity in major cities.

REIT growth is deepening the market

Listed trusts allow office owners to place income-producing properties into public portfolios. Developers can recycle capital, while investors obtain exposure to rental property without buying buildings directly.

From January 1, 2026, the Securities and Exchange Board of India classifies REITs as equity-related instruments. The change expands potential participation by mutual funds and specialised investment funds. A proposal to allow commercial banks to lend directly to REITs could further reduce financing costs.

CBRE estimates that India’s small and medium REIT opportunity could exceed $75 billion, supported by more than 500 million square feet of eligible office, logistics and retail property.

The expansion of listed trusts gives developers a clearer route to sell completed property, recover equity and finance new construction.

Record capital also creates risks

Large inflows increase competition for prime assets and development land. Buyers may accept lower yields because they expect rent and property values to continue rising.

If economic growth weakens or office supply outpaces demand, investors may find that acquisition prices were too high. Buildings with a single tenant, short leases or secondary locations are particularly exposed.

Residential investors depend on sales velocity and household purchasing power. Higher construction costs, mortgage rates or infrastructure delays can extend the investment period.

Land transactions also carry title, zoning, environmental and utility risks. Resolving them can take substantially longer than assumed in an initial financial model.

The second half depends partly on foreign capital

CBRE expects investment activity to remain strong during the remainder of 2026, supported by domestic liquidity, office demand and continued site acquisitions.

Foreign funds are likely to focus on completed income-producing buildings, joint platforms with established developers and fast-growing infrastructure sectors.

Their return will depend on financing costs, the rupee, geopolitical conditions and the availability of exits through REITs, public listings or sales to other institutions.

The full year could approach another record if current momentum continues. Simply doubling the first-half number would not be a reliable forecast, however, because large transactions are uneven and some of the record reflects one-off acquisitions and platform commitments.

Conclusion

The record $8.5 billion demonstrates that Indian real estate has developed a deep domestic capital market. Local developers and institutions, rather than foreign funds, supplied most of the equity. Land, housing and offices remained dominant, while REITs and development platforms created additional financing channels.

CBRE’s figure should not be confused with narrower estimates of private equity or institutional investment. The smaller Savills and Cushman & Wakefield totals result from different methodologies rather than necessarily conflicting evidence.

As International Investment experts report, the record confirms confidence in India’s long-term urbanisation but also increases the danger of overpaying for sites and completed assets. The durability of the cycle will depend on office rents, housing sales, developer discipline and investors’ ability to exit projects without substantial discounts.