India’s office market heats up as demand outpaces supply for 6th straight quarter: Nuvama

India’s commercial real estate sector is in the middle of a remarkable upswing, with office space leasing continuing to outstrip supply for the sixth consecutive quarter, according to Nuvama Institutional Equities’ latest “Hot Property” report.

In Q3CY25, net leasing jumped 31% year-on-year to 15.9 million sq. ft., while completions rose 44% YoY to 13.6 million sq. ft. This sustained demand has pushed vacancies down to 14.2%, marking a 240-basis-point drop YoY and a 60-bp decline quarter-on-quarter.

“Rising office demand is expected to aid a further correction in vacancies even as supply ramps up,” said Nuvama, adding that Prestige Estates, Brigade Enterprises, and Embassy REIT remain the best plays on this trend.


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Demand-Supply Balance Tilts in Favour of Developers

Gross leasing volumes improved 5% sequentially to 22.3 million sq. ft., making it the eighth consecutive quarter where absorption touched or exceeded the 20-msf mark. With demand consistently outpacing new completions, the market is tightening across major cities.

Bengaluru maintained the lowest vacancy level at 9.2%, while Hyderabad continued to record the highest at 22%. The Mumbai Metropolitan Region (MMR) saw vacancies fall to 10.6% — the lowest since 2015, and the NCR region’s 20.2% vacancy rate was the lowest since 2012.

Importantly, rents rose across all top cities, signaling healthy pricing power for developers and landlords.

The tech sector dominated leasing activity with a 31% share, followed by global capability centres (GCCs), which contributed ~38% of gross leasing during the quarter — a testament to India’s growing importance as a global business hub.

GCCs and Tech Firms Drive Leasing Momentum

Bengaluru led the GCC leasing activity, accounting for nearly 38% of total transactions. While domestic occupiers’ share fell slightly to 46% in Q3 from 52% in Q2, demand from multinational and global capability centres remained robust.

Nuvama expects completions of 50–54 million sq. ft. annually in CY25–26, though some projects could be deferred. Given this outlook, vacancy levels are likely to decline modestly over the medium term, with annual rental growth expected to accelerate.

Outlook: Consolidation and Leadership to Define the Next Phase

The brokerage believes financially strong developers are consolidating their market position as weaker players lose share.

“Developers with large rental portfolios such as Prestige Estates, Brigade Enterprises, DLF, Embassy REIT, and Mindspace REIT are best positioned to benefit from this healthy office space demand,” Nuvama said.

While the US recession risk, tariff concerns, and H-1B visa issues remain potential headwinds, Nuvama’s outlook for India’s commercial real estate sector remains constructive — with the growth cycle “gathering momentum” as corporate occupiers continue to expand.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)