India’s office real estate market staged a strong recovery in the first half of 2025, growing by an impressive 41% year-on-year in terms of gross leasing activity. After weathering the storm of pandemic-induced disruptions, global economic headwinds, and hybrid work uncertainties, the sector appears to be regaining solid ground—supported by a surge in corporate demand, flexible work formats, and strong activity in Global Capability Centres (GCCs).
According to the Knight Frank India Real Estate H1 2025 report, the total office space transacted across the top eight Indian cities reached 4.55 million square metres (mn sq m), up from 3.23 mn sq m in H1 2024. This performance marks one of the most substantial six-month gains in recent years and signals growing confidence in India’s long-term role as a global services and back-office hub.
So, what exactly is driving this recovery? A closer look at sectoral demand, city-wise dynamics, and changing occupier behavior provides deep insight into the shifting gears of India’s commercial real estate sector.
The GCC Engine: Driving Core Demand
At the heart of the resurgence is the robust and expanding footprint of Global Capability Centres (GCCs). India continues to be the most favored destination for setting up offshore delivery and innovation hubs by Fortune 500 companies and multinational corporations (MNCs). According to Knight Frank, GCCs accounted for 44% of total office leasing in H1 2025, surpassing even traditional IT services players.
Bengaluru, Hyderabad, and Pune are the leading GCC hotspots. These cities offer a skilled, English-speaking workforce, deep talent pools in engineering and tech, relatively affordable rentals, and a quality urban lifestyle that attracts global firms.
Many of the new leases are for expansion—not just relocation—indicating long-term hiring and operational intent. Companies are increasingly using their Indian offices for core R&D, product engineering, financial analytics, and even AI-based innovation.
The typical size of GCC leases has also grown, with several exceeding 50,000–100,000 sq ft. This underscores a strategic shift among MNCs to consolidate functions under one roof, reduce global costs, and improve operational control by scaling in India.
Rise of Flex Spaces and Managed Offices
Another major contributor to the surge in leasing is the continued rise of co-working and managed office solutions. Flexible office operators accounted for 21% of total transactions in H1 2025—the highest share recorded to date. Operators such as WeWork, Awfis, Smartworks, and IndiQube have rapidly expanded in Tier-1 cities, catering not only to startups but also to large enterprises and global firms.
This rise in demand is being fueled by several factors:
- Hybrid Work Models: Companies are adopting core-and-flex strategies, leasing smaller core offices and supplementing them with satellite or flexible workspaces closer to employee clusters.
- Cost Optimization: Flex spaces eliminate CAPEX, reduce lease liabilities, and offer shorter lock-ins.
- Speed to Market: Flexible operators offer plug-and-play solutions, allowing firms to establish a presence quickly in new locations.
The increasing maturity of the flex space ecosystem—backed by high-quality Grade A infrastructure and enterprise-grade services—is making it a legitimate alternative to traditional office setups.
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Sectoral Drivers: IT-BPM, Engineering, BFSI
The Information Technology–Business Process Management (IT-BPM) sector, traditionally the largest consumer of office space in India, accounted for 28% of leasing in H1 2025. Despite global layoffs and cost controls in Big Tech, demand from mid-tier IT services and engineering companies remained resilient.
Additionally, the banking, financial services, and insurance (BFSI) segment contributed 14% to total transactions, with several global banks leasing space for their fintech and data analytics units.
Interestingly, engineering and manufacturing firms are also scaling up their India offices, particularly in Pune and Chennai. These occupiers are expanding their backend design, procurement, and simulation teams in India, leveraging the country’s growing engineering talent base.
Bengaluru: The Undisputed Leader
Bengaluru continues to reign supreme in India’s office real estate market. The city recorded a 116% year-on-year surge in gross leasing activity, absorbing 1.69 mn sq m—accounting for a massive 37% of all transactions nationwide.
The city’s dominant position stems from several structural advantages:
- Deep tech talent pool
- Well-developed business districts (Outer Ring Road, Whitefield, North Bengaluru)
- Presence of top global GCCs
- Strong developer ecosystem
Significantly, 46% of Bengaluru’s new office supply was pre-committed, indicating high confidence among occupiers in both location and project quality.
Pune, NCR, and Kolkata Impress
While Bengaluru led in absolute numbers, other cities posted notable performances:
- Pune saw a 44% growth in leasing activity, reaching 0.47 mn sq m. The city also recorded the highest supply infusion, with 0.82 mn sq m of new completions—a 264% YoY increase.
- Delhi NCR posted a 27% YoY growth, with 0.67 mn sq m of leasing, driven by Noida and Gurugram, especially in the IT and BFSI sectors.
- Kolkata emerged as a surprise performer, with leasing crossing 1 million sq ft (approx. 0.1 mn sq m) for the first time, primarily fueled by IT/ITES and government-backed infrastructure expansion.
Shrinking Vacancy, Rising Rents
The sharp increase in leasing and moderate new supply resulted in tightening vacancy levels across India. The pan-India vacancy rate declined to 14.7% in H1 2025 from 15.5% a year ago. This trend is more pronounced in cities like Bengaluru, Pune, and Hyderabad, where Grade A spaces in prime micro-markets are getting quickly absorbed.
Rents responded accordingly:
- Mumbai continued to command the highest average rents at ₹129/sq ft/month (+12% YoY)
- NCR saw average rents rise to ₹98/sq ft/month (+8%)
- Hyderabad and Pune recorded increases of 10% and 9% respectively
Landlords in high-demand corridors have gained stronger negotiating power, especially for fully fitted spaces and green-rated buildings.
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Sustainable, Tech-Enabled Workspaces in Focus
Demand in 2025 is not just about space—it’s about smart, sustainable, and future-ready workplaces. Occupiers are increasingly seeking green-certified buildings (LEED, IGBC, EDGE) and tech-integrated campuses with digital access controls, energy-efficient systems, and wellness features.
Developers that offer:
- Air quality management
- Renewable energy integration
- Smart metering and IoT building controls
- Employee amenities and wellness zones
are seeing higher absorption and better rental yields.
Sustainability is no longer a ‘nice to have’—it’s a core leasing criterion for large global tenants, especially ESG-compliant firms.
Challenges and Cautious Optimism
Despite the impressive growth, the office market is not without challenges. Some of the headwinds include:
- Global macroeconomic uncertainty and cautious hiring by large IT players
- Delays in large decision-making cycles for long-term leases
- A slight mismatch in expectations between landlords and tenants on rental escalation
Additionally, many companies are still fine-tuning their long-term workplace strategies, especially around hybrid work. However, the quality of demand, dominated by high-credit GCCs and enterprise occupiers, gives stakeholders ample reason for optimism.
Outlook for H2 2025
With India’s economic fundamentals remaining robust and global companies doubling down on cost optimization, the momentum in the office market is expected to continue through the second half of 2025.
Factors likely to fuel growth include:
- Continued expansion of GCCs in Tier-1 and Tier-2 cities
- Increased adoption of flex spaces by large enterprises
- Strong investor interest in income-yielding commercial assets
- Completion of major infrastructure corridors (metro, highways, airports)
Developers with ready inventory, ESG credentials, and strong tenant relationships are best positioned to capitalize on the sustained recovery.
Conclusion
India’s office real estate market is not just bouncing back—it’s evolving. From GCC-led expansion to flex space maturity and sustainability-driven leasing, the sector is undergoing a deep transformation. The 41% growth in H1 2025 is not merely a post-pandemic rebound; it reflects a long-term structural re-alignment in favor of India as a global operations hub.
As businesses recalibrate their global footprints, India stands tall—not just for its talent and cost advantage, but for the evolving quality of its commercial real estate offerings. If current trends hold, 2025 may well go down as the turning point year for India’s office market on the global stage.