New Delhi: India’s office real estate market recorded its strongest quarterly leasing performance in Q2 2026, with demand significantly outpacing new supply despite a sharp rebound in construction activity. According to Vestian, office absorption reached an all-time high of 23.9 million sq ft, while new completions stood at 14.9 million sq ft, widening the demand-supply gap to 9.0 million sq ft and contributing to lower vacancy levels and rising rentals across key commercial markets.
The report noted that construction activity recovered strongly during the quarter after a subdued performance in the previous quarter. New office completions increased 53% quarter-on-quarter to 14.9 million sq ft, whereas leasing activity grew at an even faster pace. The widening gap between demand and supply led to a 105 basis point improvement in vacancy levels, while office rentals appreciated between 3% and 9% compared with the previous year.
According to Vestian, the sustained imbalance between supply and demand is expected to further reduce vacancy rates and support rental growth across major office markets, indicating a gradual shift towards a developer-driven market.
Bengaluru Leads New Supply; Southern Markets Dominate Leasing
The recovery in construction was largely driven by Bengaluru, Pune, Mumbai and NCR, which together contributed nearly 85% of the total office completions during the quarter. Bengaluru alone accounted for 40% of the pan-India office supply, reflecting developers’ continued focus on the country’s established commercial hubs.
On the demand side, leasing activity remained concentrated in India’s largest office markets. Bengaluru, NCR and Hyderabad together accounted for approximately 63% of total office absorption during Q2 2026.
Southern markets continued to strengthen their position, with Bengaluru, Chennai and Hyderabad contributing 54% of total leasing, up from 49% in the previous quarter. In contrast, the share of Western cities declined from 35% to 25%, primarily due to a temporary slowdown in leasing activity in Mumbai.
Technology Firms and Flexible Workspaces Continue to Drive Demand
The IT-ITeS sector remained the largest occupier, accounting for 41% of total office absorption during the quarter. Managed Offices, Coworking and Flexible Spaces followed with a 22% share, reflecting occupiers’ continued preference for agile workplace solutions.
Flex Space operators ranked among the top two occupier categories across all major office markets and emerged as the largest occupier segment in NCR. Meanwhile, the BFSI sector contributed 8% of overall leasing activity, supported by continued expansion among financial institutions.
GCC Expansion Continues to Power Office Market
Global Capability Centres (GCCs) remained the biggest contributor to office demand during the quarter, leasing 12.5 million sq ft, equivalent to 52% of total office absorption across India.
Bengaluru, Hyderabad and Pune together accounted for 72% of total GCC leasing, reinforcing India’s position as a preferred destination for multinational companies establishing Global Capability Centres.
The report also highlighted the growing preference for sustainable office assets. Green-certified office buildings accounted for 87% of leasing activity during Q2 2026, compared with 85% in the previous quarter.
As demand continued to exceed supply, vacancy levels improved across all seven major office markets. NCR and Kolkata recorded the sharpest quarterly decline, with vacancy levels falling by 189 basis points each. Rentals also witnessed marginal appreciation across leading commercial markets, with Vestian expecting further improvement as the demand-supply gap widens.
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.”
Also Read: India’s Infrastructure Boom Needs a Capital Strategy, Not Just Execution
City-wise Performance
Bengaluru retained its position as India’s largest office market, accounting for 27% of total office absorption, with Outer Ring Road (ORR) contributing 76% of the city’s leasing activity.
Chennai continued to witness demand from technology companies and Flex Space operators while maintaining one of the lowest vacancy rates among the seven major office markets at 3.4%.
Hyderabad remained dominated by PBD-West, which accounted for 96% of the city’s office absorption. The city also contributed 21% to the country’s total GCC leasing.
Mumbai recorded office absorption of 2.1 million sq ft, marking its lowest quarterly performance in the past 12 quarters. Despite softer demand, the BFSI sector remained the city’s largest occupier, accounting for 36% of total leasing.
Kolkata more than doubled its leasing activity over the previous quarter, with PBD contributing 96% of total office absorption.
Pune registered the highest year-on-year growth among the seven major office markets, with office absorption rising 178%, driven by strong demand from technology companies and GCCs.
NCR emerged as the second-largest office market during the quarter. Gurugram accounted for 67% of the region’s office absorption, supported by robust demand from Flex Space operators.
