Indian Office Vacancy Hits Five-Year Low as Demand Outstrips Supply, Cushman & Wakefield Reports
Gurugram, April 15, 2026: India’s office real estate sector has reached a significant post-pandemic milestone, with vacancy levels falling to 13.85% in the first quarter of 2026. This figure marks the first time since 2020 that the national vacancy rate has dipped below the 14% threshold. According to the Q1 2026 Office MarketBeat report by Cushman & Wakefield, the market is experiencing its eleventh consecutive quarter of tightening, driven by a robust appetite for space and a notable slowdown in new construction.
The supply-demand imbalance was particularly evident in major hubs like Bengaluru, where vacancy rates remain below 8%, and Mumbai, which has officially transitioned into a single-digit vacancy phase at approximately 9%. The report highlights that some prime business districts are seeing even more extreme conditions, with vacancy levels plummeting to as low as 2% in certain Bengaluru micro-markets. This scarcity of available space is being compounded by a sharp 43% quarterly decline in new completions, as only 8.8 million square feet (MSF) of new office stock was delivered across the country’s top eight cities this quarter.
As a direct result of these tightening conditions, rental prices are experiencing a steady upward climb. For the first time, the pan-India stock-weighted average rent has surpassed the INR 100 per sq ft per month mark. Hyderabad emerged as the leader in rental growth with a 12% year-on-year increase, followed closely by Delhi NCR. Analysts expect that the current market dynamics will remain increasingly favorable to landlords throughout the remainder of 2026, especially for high-quality assets in established business districts.
Leasing activity remains healthy, with Gross Leasing Volume (GLV) reaching approximately 22 MSF for the quarter, a 13% increase over the same period last year. Mumbai stood out as the top performer, recording its highest-ever quarterly leasing volume of 6.6 MSF, largely driven by significant renewal deals. Global Capability Centres (GCCs) continue to be the primary engine of this growth, accounting for roughly 40% of the total office take-up. On a sectoral basis, IT-BPM led the charge, followed by the BFSI sector and flexible workspace operators.
Anshul Jain, Chief Executive – India, SEA, MEA & APAC Office and Retail at Cushman & Wakefield, noted that the momentum of 2025 has transitioned seamlessly into the new year. “India’s office market has carried forward the momentum of 2025 into the first quarter of this year. Gross leasing volume stood at ~22 MSF in Q1 2026, a 13% increase over the same period last year, reflecting a robust demand across sectors,” Jain said. He further explained that while 61 MSF of new supply is expected later this year, “strong absorption and pre-commitment trends are likely to keep overall vacancy broadly stable, even as rental momentum remains firm.”
Addressing potential headwinds, Jain added, “Amid the global uncertainties, recently accentuated due to the West Asia crisis, we are closely assessing how occupiers factor these into their decision-making. And while the pace of expansion may be impacted in the near term, underlying demand in India continues to remain resilient.”
The shift in occupier behavior is becoming more pronounced as companies compete for a shrinking pool of premium space. Veera Babu, Executive Managing Director, Tenant Representation – India at Cushman & Wakefield, emphasized that quality is now the top priority. “The market has entered 2026 with a clear supply-demand imbalance, where sustained occupier interest continues to outpace the availability of quality office space across key markets,” Babu stated. “Occupiers are increasingly prioritising asset quality, location efficiency and readiness, with a clear preference for buildings that can support evolving workplace, technology and sustainability requirements. We expect vacancy levels to remain tight, especially in high-quality assets across established business districts.”
