India’s office market is poised for significant growth in 2025, building on the momentum from 2024. The country’s commercial real estate sector is set to continue expanding, with demand for Grade A office spaces and flexible work solutions rising.
Business needs and evolving workplace strategies are driving this demand, as published by The Economic Times.
The Indian office market saw strong leasing activity in 2024, with the top six cities reporting 47 million square feet of gross leasing by the third quarter, reflecting a 23% year-on-year growth. Bengaluru and Hyderabad are the leading markets, accounting for nearly half of this leasing activity. By the end of 2024, Grade A absorption is expected to surpass 60 million square feet, marking a new high for the market.
Tech companies continue to drive a significant portion of the leasing activity, although their demand has stabilized. These firms are expected to account for roughly 25% of total leasing activity in 2024. In addition, the demand for flexible office spaces (flex spaces) is on the rise, projected to account for nearly 20% of leasing activity across India’s top six cities in 2024.
The completion of 37.4 million square feet of new office space in 2024, mainly driven by Bengaluru and Hyderabad, indicates strong market growth. Overall, new supply is expected to exceed 50 million square feet by the end of 2024, with vacancy rates remaining stable. Rental growth is expected to range between 5% and 10% annually across most major cities.
India’s office market is expected to experience continued expansion in 2025, with a growing adoption of the “Core + Flex” model, which combines traditional office spaces with flexible lease options. This approach helps businesses meet the needs of hybrid work models and is likely to drive demand for flexible office solutions.
The market remains optimistic, with strong economic growth, favorable business conditions, and a rising demand for office space in India. Leasing activity is projected to continue its upward trend, with 60 million square feet of leasing activity becoming the new normal.
In 2025, the banking, financial services, and insurance (BFSI) sectors, as well as engineering and manufacturing, are expected to drive 35% to 40% of the demand for office space in India. Although tech companies’ leasing activity may stabilize, these companies are expected to continue adopting hybrid and distributed work models, making up around 25% to 30% of leasing activity.
Global Capability Centers (GCCs) are expected to play a key role in driving demand for Grade A office space, accounting for 40% to 50% of the total leasing activity in 2025. State governments are likely to implement policies similar to the Karnataka GCC policy, encouraging the growth of these centers. As GCCs expand, the demand for modern, high-quality office spaces will continue to grow. Smaller cities, such as Mysuru, Mangaluru, Hubli, and Dharwad, are expected to complement established GCC hubs like Bengaluru.
With the growing adoption of hybrid work strategies, businesses are increasingly opting for smaller office footprints. The average size of office deals fell to 43,000 square feet in 2023, down 11% compared to pre-pandemic levels. However, the number of office deals has risen by 43%. Mid-sized deals (50,000 to 99,999 square feet) are projected to gain momentum across Tier I cities in the coming years.
Smaller cities, such as Bhubaneswar, Chandigarh, Coimbatore, Indore, Jaipur, Kochi, and Thiruvananthapuram, are seeing increased demand for office space. These cities benefit from lower operating costs, an ample supply of skilled labor, and infrastructure improvements, making them attractive for businesses. Developers are expected to target these regions as they continue to expand their Grade A office space offerings.
Flex spaces, which offer businesses more adaptability and reduced operational costs, are now becoming a mainstream option. As companies continue to rethink their workplace strategies, flex spaces are expected to capture 20% of the overall office space demand in 2025.
Many leading flex space providers are adopting asset-heavy models, acquiring commercial properties rather than leasing them. These providers are expected to grow their portfolios and expand to Tier-II and Tier-III cities, where the demand for flexible office spaces is on the rise.
Sustainability is becoming increasingly important in India’s office market. Green-certified buildings are now a requirement for new developments, with LEED and GRIHA certifications becoming the standard. Nearly 80% of the office supply pipeline over the next two to three years is expected to feature green-certified office spaces.
Existing office buildings are also undergoing retrofitting processes to improve energy efficiency and meet sustainability standards. An estimated 95 to 110 million square feet of office space that is less than 10 years old is likely to undergo green certification with minimal capital expenditure over the next few years.
India’s office market is on a solid growth trajectory, with strong demand from a variety of sectors, including BFSI, engineering, and GCCs. The growing shift toward flexible and sustainable office spaces will continue to shape the market in 2025. As leasing activity increases, and rental rates rise, India’s office real estate sector remains a strong investment prospect in the coming years.