AI redraws office demand dynamics as GCCs power India's leasing market

Artificial intelligence has started to reshape India's office space demand, with third-party IT services firms reducing leasing amid workforce optimisation and changing delivery models, while Global Capability Centres (GCCs) and flexible workspace operators emerge as the biggest drivers of commercial real estate demand.

The shift in occupier preferences was evident in the first half of 2026, when third-party IT services accounted for 13% of office leasing at 6.4 million sq ft, down from 22% or 10.9 million sq ft a year ago, showed Knight Frank India data. In contrast, GCCs accounted for a record 43% of total office leasing at 20.6 million sq ft, up from 39% a year earlier, while flexible workspaces increased their share to 24% from 21%.

Overall office transactions across eight major cities stood at 48 million sq ft during January-June 2026, marginally lower by 2% year-on-year but marking the second-best half-yearly leasing performance on record. The market remained resilient despite heightened geopolitical tensions, global trade disruptions and uncertainty across major international office markets.


“India's office market continues to outperform most global office markets, supported by sustained occupier confidence and long-term corporate expansion strategies…Although AI-driven workplace transformation and global economic uncertainty may influence near-term space planning decisions, India's deep talent pool, favourable business environment and growing strategic importance will continue to drive healthy office demand through second half of 2026 and beyond," said Viral Desai, International Partner, Senior ED, Knight Frank India.

According to him, GCCs have transformed office demand dynamics, while flexible workspaces continue to gain traction as enterprises seek greater operational agility.

“AI is reshaping occupier requirements rather than reducing office demand. While some technology firms are optimising their footprint, GCCs and innovation-led businesses continue to expand, creating demand for premium, flexible and technology-enabled office spaces. Despite geopolitical uncertainty and cautious decision-making by some occupiers during the first half of the year, India's office market remained resilient. We expect this shift to accelerate the flight to quality across India's office market,” said Ramesh Nair, MD & CEO, Mindspace Business Parks.

According to Shishir Baijal, International Partner, CMD, Knight Frank India, the record participation of GCCs, robust leasing across multiple cities, declining vacancy levels and sustained rental growth underscore the long-term strength of India's commercial real estate market. While global uncertainties may continue to influence business sentiment in the near term, India's office sector remains exceptionally well-positioned for sustained growth.

The shift is not just changing office demand but also strengthening India's position in global enterprise strategies.

“AI is reshaping the nature of office demand in India, but more importantly, it is strengthening India’s role in the global enterprise ecosystem. GCCs are at the centre of this transformation. As global companies become more technology-led, they are looking beyond cost efficiency and choosing India for the depth of its engineering, digital and AI talent,” said Amit Shetty, CEO of Embassy REIT.

According to him, the conversation has clearly moved from cost arbitrage to capability arbitrage, with companies building strategic capability centres here to support core global business functions.

The moderation in third-party IT leasing reflects workforce optimisation, cautious hiring and changing delivery models as AI adoption reshapes enterprise technology spending. While near-term demand has softened, India's technology services sector remains well-positioned to benefit from the long-term shift towards AI-enabled, higher-value services.

Flexible workspaces, including managed office and co-working operators, leased 11.4 million sq ft during the first half of 2026, up from 10.8 million sq ft a year earlier, as enterprises increasingly adopted hybrid portfolio strategies that combine conventional leases with flexible office solutions.

India-facing businesses also expanded, accounting for 20% of office leasing at 9.5 million sq ft, a 9% increase from 8.7 million sq ft a year ago, supported by rising formal employment, expanding consumer demand and infrastructure-led growth.