India Office Market Hits Record 23.9 Million Square Feet Absorption In Second Quarter Of 2026 As Widening Supply Deficit Drives Rental Growth: Vestian
New Delhi, July 17, 2026: Commercial real estate construction activity in India rebounded sharply in the second quarter of 2026, while office leasing surged at an even faster pace to reach historic highs. According to the latest research report from property consultancy Vestian, new project completions increased by 53% quarter-on-quarter to 14.9 million square feet, while office absorption climbed to an all-time high of 23.9 million square feet. This performance widened the quarterly demand-supply gap to 9.0 million square feet, pulling down vacancy levels by 105 basis points and driving annual rental appreciation of 3% to 9% across major commercial hubs in a gradual shift toward a developer-driven market, Vestian said in a press release.
The recovery in construction and supply was primarily led by Bengaluru, Pune, Mumbai, and the National Capital Region (NCR), which together accounted for nearly 85% of all new completions during the three-month period. Bengaluru alone contributed 40% of the pan-India supply, reflecting developers’ continued focus on established office markets. On the demand side, leasing remained highly concentrated in India’s principal business hubs, with Bengaluru, NCR, and Hyderabad collectively accounting for approximately 63% of the pan-India absorption. Southern cities led the momentum, with Bengaluru, Chennai, and Hyderabad contributing 54% of total leasing, up from 49% in the previous quarter, while the share of Western cities declined from 35% to 25% due to a temporary moderation in Mumbai’s leasing activity.
The IT and ITeS sectors continued to dominate office demand, securing a 41% share of total absorption during the quarter. Managed offices, coworking spaces, and flexible spaces remained the second-largest occupier category at 22%, emerging as one of the top two segments across all major cities and ranking as the single largest demand driver in NCR. Meanwhile, the Banking, Financial Services, and Insurance (BFSI) sector accounted for 8% of total leasing, supported by the ongoing physical expansion of financial institutions.
Global Capability Centres (GCCs) remained the premier driver of India’s office market, leasing 12.5 million square feet to account for 52% of the country’s total absorption in the second quarter of 2026. Bengaluru, Hyderabad, and Pune together accounted for 72% of this GCC-specific leasing, reaffirming India’s status as the preferred destination for multinational corporations. This sustained corporate expansion, paired with a growing corporate preference for sustainable real estate, resulted in green-certified office buildings accounting for 87% of all leasing during the quarter, up from 85% in the first quarter of the year.
Consequently, vacancy levels improved across all seven major cities, with NCR and Kolkata recording the sharpest quarterly declines of 189 basis points each, while rentals witnessed marginal appreciation across major office markets. Industry experts predict that vacancy rates may improve further, and rentals are expected to rise as the demand-supply mismatch intensifies.
Commenting on the market trajectory, Shrinivas Rao, FRICS, CEO, Vestian said, “India’s office market continued its growth momentum in Q2 2026 on the back of strong occupier demand. To cater to the rising demand, developers ramped up construction activities across the major cities, resulting in significant supply additions and new project launches in Q2 2026. The continued expansion of Global Capability Centres (GCCs), along with sustained demand from technology companies and managed office and flexible workspace operators, is expected to keep the office market buoyant in the future as well.”
A city-wise analysis highlighted distinct regional drivers across the major markets. Bengaluru retained its leadership position by accounting for 27% of pan-India absorption, with the Outer Ring Road (ORR) alone contributing 76% of the city’s total leasing activity. In Chennai, technology and flexible space occupiers continued to drive transactions, helping the city maintain one of the lowest vacancy rates in the country at 3.4%.
In Hyderabad, the Peripheral Business District (PBD) West dominated the local market by accounting for 96% of the city’s absorption, while local GCC transactions contributed 21% to the pan-India GCC total. Conversely, Mumbai recorded an absorption of 2.1 million square feet, marking its lowest leasing volume in the past 12 quarters, though BFSI firms remained the dominant local customer with a 36% share of the city’s take-up.
Eastward, Kolkata saw its leasing activity more than double over the previous quarter, with its Peripheral Business District accounting for 96% of the city’s total absorption. Pune recorded the highest year-on-year absorption growth among the top seven cities at 178%, supported by robust demand from technology companies and GCC entities. Finally, NCR emerged as the second-largest office market during the quarter, with Gurugram contributing 67% to the city’s overall absorption, heavily propelled by robust demand from flexible space operators.
