Indian office real estate market records 42.9 million sq ft absorption

The Indian office real estate market recorded net absorption of 42.9 million sq ft in the first nine months of 2026, up 2% year-on-year (YoY) from 42 million sq ft in the corresponding period of 2025, according to Anarock.

Interestingly, the composition of occupier demand is witnessing a shift, with the shares of coworking and BFSI growing steadily.

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While overall absorption remained stable, coworking and banking, financial services and insurance (BFSI) increased their shares of leasing, with these two segments accounting for 47% of total office demand in 9M 2026, up from 41% a year earlier.

"Coworking has overtaken IT/ITeS office space demand - at 26%, it now commands the highest overall leasing share in 9M 2026, followed closely by IT/ITeS with a 25% share and BFSI with 21%,” said Peush Jain, Managing Director - Commercial Leasing & Advisory, Anarock Group.

New office completions in the top seven cities increased 5% YoY to 41.1 million sq ft in 9M 2026 from 39.21 million sq ft in 9M 2025.

"Bengaluru saw the highest new office supply in this period - about 12.35 Mn sq ft in 9M 2026 against 10.41 Mn sq ft in same period last year, denoting a 19% y-o-y rise. NCR and Pune new office supply dropped 25% and 36%, respectively in the period," said Jain.

While IT/ITeS remains a significant contributor, the broader sectoral mix is helping diversify demand. Declining vacancies and rising rentals indicate that office markets continue to attract occupiers, though performance remains uneven across cities.

Going forward, the sustainability of this momentum will depend on continued leasing activity, the pace of new supply and how efficiently individual markets absorb additional office space. While Bengaluru and Hyderabad remain important growth drivers, the performance of other cities will depend on how demand keeps pace with available and upcoming supply.

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"Interestingly, pan-India office vacancy rate declined by 105 basis points to 15.15% in 9M 2026 from 16.2% last year, and average office rentals rose 8% to INR 97 per sq. ft. per month from INR 90. These trends point to the office market's continuing resilience, even as demand growth varies across cities and occupier segments,” Jain said.

The fact that coworking emerged as the largest occupier segment in 9M 2026, with a 26% share of office demand (up from 23% in 9M 2025), is significant. It highlights the growing importance of flexible workspace formats as businesses seek greater flexibility in their real estate commitments and workplace strategies.

BFSI's 21% share, a meaningful rise from 18% a year earlier, reinforces the segment's position as a key source of office demand alongside technology-led occupiers.

While IT/ITeS accounted for 25% of total demand, down from 29% in 9M 2025, the sector remained the second-largest contributor to office leasing.

Manufacturing and industrial occupiers increased their share marginally to 15% from 14%, while consultancy businesses saw their share fall to 6% from 8%. E-commerce remained unchanged at 4%, while miscellaneous sectors accounted for 3%, compared with 4% a year earlier.

The pan-India office vacancy rate declined to 15.15% in 9M 2026 from 16.2% a year earlier. All seven cities recorded lower vacancy rates, indicating an improvement in overall occupancy conditions despite differences in absorption and supply additions.

Chennai reported the lowest vacancy rate at 8.75%, followed by Bengaluru at 11% and Pune at 11.6%. Hyderabad's vacancy rate declined by 250 basis points to 24%, while NCR recorded a reduction of 140 basis points to 20.6%.

Average office rentals increased across all seven cities. Hyderabad led with 12% growth, followed by NCR at 10%, Bengaluru at 9% and MMR at 8%. Chennai, Pune and Kolkata each recorded rental increases of 6%. At INR 156 per sq ft per month, MMR remained the most expensive office market, while Kolkata recorded the lowest average rental at INR 66 per sq ft per month.

“The combination of lower vacancy and higher rentals points to improving market conditions at the national level. However, the differentiated performance of individual markets - strong absorption growth in Hyderabad and Bengaluru and softer activity in NCR, Pune, and Chennai - is notable,” said Jain.