India’s office leasing hits record high, but supply surge drives up vacancies

India’s office market posted record-high leasing in the first nine months of 2026. But rising vacancies and uneven demand across cities show that sustaining this growth will not be easy, as new supply surges and companies rethink how they expand.

Gross office leasing reached 61.06 million sq ft during January–September, up 8.1% year-on-year, according to real estate research and analysis firm JLL. Leasing in the July–September quarter rose 40.9% sequentially to 23.17 million sq ft, while net absorption reached 41.96 million sq ft during the nine-month period, an increase of 5.3% from a year earlier.

However, the record performance was not uniform across markets. Leasing declined in several cities, while the completion of 43.7 million sq ft of new office space over the nine months contributed to a marginal rise in vacancies, underscoring the challenge of matching supply with occupier demand.

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Bengaluru accounted for 28% of gross leasing during January–September, at 17.11 million sq ft, followed by Delhi-NCR at 10.78 million sq ft and Hyderabad at 9.93 million sq ft.

Gross leasing in Delhi-NCR fell 17% year-on-year, while Chennai and Kolkata recorded declines of 13.1% and 31.5% respectively. The divergence points to growing differences in the performance of individual office markets despite the increase in national leasing volumes.

Technology firms shift focus to efficiency

Technology companies remained the largest contributor to quarterly leasing, accounting for 25.6% of gross transactions in the September quarter. However, the sector’s changing expansion priorities could influence future office demand.

Domestic technology firms are increasingly focusing on artificial intelligence-led services, higher-value offerings and operational efficiency rather than headcount-driven growth, JLL said. This shift has coincided with slower leasing activity among domestic technology companies compared with the corresponding period in 2025.

The trend presents a challenge for a market in which technology companies have traditionally contributed significantly to office demand. Although the sector remains the largest contributor to quarterly leasing, its changing space requirements could affect the pace of future expansion.

Other sectors have helped support activity. Banking, financial services and insurance (BFSI) accounted for 25.3% of third-quarter leasing, recording its highest-ever quarterly leasing volume. Manufacturing and industrial occupiers contributed 16.1%.

New supply pushes vacancy higher

India’s office vacancy rate across the top seven cities increased 30 basis points quarter-on-quarter to 14.8% in the September quarter, even as net absorption reached a nine-month record.

New completions totalled 43.7 million sq ft during January–September, the highest supply recorded for any comparable nine-month period since before the Covid-19 pandemic, according to JLL.

The rise in vacancies despite strong absorption highlights the pressure created by new supply. However, the trend varies across markets. Mumbai and Delhi-NCR recorded their lowest vacancy rates in 16 and 15 years respectively, while Hyderabad’s vacancy remained broadly in line with 2025 levels.

Bengaluru reported a marginal increase in vacancies, primarily due to substantial project completions during the quarter.

These differences suggest that supply pressures are not uniform across the country. The challenge for the sector is to ensure that new office space is absorbed at a pace consistent with demand in individual markets.

GCCs sustain demand as occupier mix changes

Global capability centres (GCCs) continued to underpin the market, leasing 26.2 million sq ft during the first nine months of 2026, up 30.6% year-on-year. They accounted for 42.9% of total gross leasing, equivalent to 84% of the segment’s full-year leasing volume in 2025.

Foreign-headquartered organisations accounted for 57.8% of leasing during the period, highlighting their importance to India’s office market.

Domestic leasing increased 9.2% year-on-year to 25.8 million sq ft. Within this segment, indigenous flexible-space operators accounted for 52% of the space leased by domestic firms. Across the top seven cities, flexible-space operators secured a record 13.83 million sq ft during the nine months.

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The growing contribution of GCCs and flexible-space operators is changing the composition of demand, even as some domestic technology firms adopt more measured expansion strategies.

100-million-sq-ft milestone in focus

JLL expects India’s office leasing in 2026 to match the historic levels recorded in 2025, with gross leasing potentially reaching 100 million sq ft over the next two to three years.

The outlook is supported by GCC expansion, new entrants and demand associated with artificial intelligence development. However, sustaining the momentum will depend on the pace of absorption of new supply, continued corporate expansion and the performance of weaker office markets.

The record leasing figures indicate resilience, but rising vacancies and uneven city-level demand remain key indicators to watch as the market moves into the final quarter of 2026.