India's office market remains cautious despite resilient demand and selective rental gains: Report
New Delhi, June 25
Office space demand exceeded new supply in Q2FY26 with rents rising modestly in select active micro markets, still the overall market remains cautious, as per a Colliers report.
The report noted, despite a slower second quarter, India's office market growth has remained intact through the first half of 2026. "H1 2026 recorded 35.7 million sq ft of gross leasing across the top seven cities, a 6% rise compared to the corresponding period in 2025," while "Grade A space uptake moderated slightly in Q2 2026 (April - June) to 17.4 million sq ft following a robust first quarter," it said.
At the same time, the demand for office spaces in India has continued to increase supported by the "expansion of Global Capability Centers (GCCs) in preferred markets, steady leasing across diverse occupier segments and continued adoption of flexible workspaces," the report added.
Regionally, during H1 2026, Bengaluru led India's office space market, driving space uptake of 10.5 million sq ft, accounting for a 29 per cent share. At the same time, Hyderabad recorded around 7.2 million sq ft of leasing activity, contributing nearly one-fifth of total demand in H1 2026 and registering a 47% YoY rise in leasing.
Delhi NCR, Mumbai, and Chennai each recorded leasing activity of 4-5 million sq ft in H1, while Q2 saw a sharp moderation in demand, with Mumbai and Pune witnessing a 25-30% YoY decline in space uptake as occupiers turned cautious.
The share of large deals (100,000 sq ft & above) in Mumbai, declined from around "41 per cent in Q1 2026 to 13 per cent in Q2 2026," while "large-sized transaction share in Pune meanwhile dropped from around 63 per cent to 38 per cent during the same period."
"Importantly, during Q2 2026 flex space leasing touched 4.6 million sq ft, over 90% higher than the average quarterly flex space demand of last five years, signaling growing adoption of flexible workspaces as a core component of occupier real estate portfolios," the report added.
In Q2 2026, companies took more office space than what was newly built or added, because developers were cautious in adding supply. However, vacancy levels remained rangebound at around "15 per cent at the India level, owing to relocation and churns."
At the same time, office rents increased slightly (up to 5%) in some busy areas, but overall the market still remains cautious.
— ANI
Reader Comments
The 90% increase in flex space leasing is the real story here. Companies are clearly hedging their bets - they want the option to scale up or down without long-term commitments. Smart move in this uncertain global economy. My startup uses flexible workspace and it's been a game changer for our cash flow.
Notice how Hyderabad is doing so well? 47% YoY growth! That's impressive for a city that was already growing fast. But I'm worried about Mumbai and Pune - 25-30% decline is significant. Hope this is just a seasonal blip and not a trend, because the IT corridors there employ so many people.
As an expat working in India, I find this market fascinating. The resilience is impressive given global headwinds. But I think the "cautious" tone is right - companies are prioritizing quality over quantity. The vacancy rate at 15% is healthy, not alarming. Smart developers will focus on Grade A+ buildings with sustainability features.
The report misses one key factor - work from home is still affecting demand patterns. Many companies are using hybrid models, which explains the flex space boom but also the caution in taking long-term leases. I think we'll see more consolidation in the next 12 months.
My cousin just moved to Hyderabad for a job at a new GCC - says the office culture there is amazing. The 47% YoY growth isn't surprising given how much investment is flowing into the city. Meanwhile, I'm in Noida and even though leasing is 4-5
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.