Mumbai, 15 May 2026: The Indian commercial office real estate market is bifurcating – while Grade A office leasing has hit record highs in the top 7 cities of the country, mid-tier and secondary stock is increasingly being neglected by economics as well as a structural shift in the occupier profile driving office market demand.
Peush Jain, Managing Director – Commercial Leasing & Advisory, ANAROCK Group, says, “India’s Grade A office market had its best year on record in 2025. According to ANAROCK Research, net leasing across the top 7 cities accelerated to 58.2 Mn sq. ft. registering 17% YoY growth. This broad-based momentum sustained throughout all four quarters on the back of companies’ expansion, GCC scaling and an improving leasing environment.”
“The demand anchor was the southern markets, which absorbed a combined 29.35 Mn sq. ft. in Bengaluru, Hyderabad and Chennai,: says Jain. “These markets accounted for half of India’s total net office absorption in 2025. Bengaluru remains the top contributor with 14.95 Mn sq. ft. – a 26% national share – but is now witnessing moderating growth at 1% YoY. Hyderabad followed with 8.5 Mn sq. ft. – +14% YoY – and Chennai with 5.9 Mn sq. ft., or +18% YoY.”
2026 Keeps Pace
Similar trends were seen in Q1 2026, with net office absorption recording 5% yearly rise – from 12.9 Mn sq. ft. in Q1 2025 to nearly 13.5 Mn sq. ft. in Q1 2026. While MMR, NCR and Pune recorded a decline in net absorption, the southern markets continued their bull run with over 64% yearly jump collectively.
|
Net Office Absorption (In Mn Sq. ft.) |
|||
|
City |
Q1-2026 |
Q1-2025 |
% Change (Q1-2026 Vs Q1-2025) |
|
Bengaluru |
4.77 |
2.85 |
67% |
|
MMR |
1.8 |
2.6 |
-31% |
|
NCR |
1.53 |
2.7 |
-43% |
|
Chennai |
1.05 |
0.7 |
50% |
|
Hyderabad |
2.95 |
1.8 |
64% |
|
Pune |
1.1 |
2 |
-45% |
|
Kolkata |
0.3 |
0.25 |
20% |
|
Total |
13.5 |
12.9 |
5% |
Source: ANAROCK Research & Advisory
Meanwhile, Grade A gross leasing in the top 7 cities saw GCCs contributing 41% in 2025, up from 36% in 2024, while in Q1 2026 the share increased to 47% of the total gross leasing of nearly 21.12 Mn sq. ft.
“In Delhi-NCR alone, MNCs leased almost 51 lakh sq. ft. till early 2025 over two years – exclusively to establish up GCC campuses,” says Peush Jain. “The fact that accurate aggregate data on mid-tier leasing volumes is lacking reflects the fragmented, mostly unorganised structure of this side of the CRE industry. However, our own office leasing readings repeatedly demonstrate that mid-tier properties are losing occupier favour when Grade A alternatives are available within the same micro-market.”
Vacancy: Mid-Tier Lagging, Grade A Tightening
Vacancy in Grade A offices in the top 7 cities declined to 16.1% in 2025 from 16.5% in 2024, with all but one city registering reductions. Chennai was the top performer, with a mere 8.8% vacancy rate – its lowest since 2019. Hyderabad too, registering the highest vacancy rate at 26.3%, saw a marginal fall of 0.2% YoY, suggesting that absorption has been constant despite the addition of new supply.
In Q1 2026, Grade A office vacancy rates have shrunk further to 15.50% across the top 7 cities. For mid-sized office buildings, the structural dynamics are worse. Vacancy in older, secondary-grade buildings tends to be both higher and more persistent, clocking in at anywhere between 20-25%. Occupiers raising the bar to Grade A rarely relocate into mid-tier stock, so vacancy in such assets tends to increase when new Grade A supply enters a micro-market.
|
Office Vacancy (% age) |
||
|
City |
Q1-2026 |
Q1-2025 |
|
Bengaluru |
11.50% |
12.40% |
|
MMR |
13.80% |
15.20% |
|
NCR |
21.00% |
22.40% |
|
Chennai |
8.90% |
9.10% |
|
Hyderabad |
24.70% |
26.50% |
|
Pune |
11.60% |
11.70% |
|
Kolkata |
17.20% |
17.90% |
|
Total |
15.50% |
16.30% |
Source: ANAROCK Research & Advisory
Rent Premium Vindicated
Rentals in Grade A offices cost up to 20% more than in their mid-tier counterparts, depending on location, facilities etc. Data trends indicate that average monthly Grade A rentals increased by 6% in 2025 to INR 92 per sq. ft. In Q1 2026, avg. office monthly rentals across the top 7 cities rose further to INR 93 per sq. ft.
Bengaluru recorded the highest growth of 9% YoY in 2025 against 2024, and the city continued this trend by recording the highest (11%) growth in Q1 2026 against the preceding quarter (Q4 2025).
The premium is being paid freely because:
- GCCs, MNCs and institutional occupiers mainly prefer Grade A. Q1 2026 saw GCCs lease 9.87 Mn sq. ft. across the country with Bengaluru alone contributing 40%.
- Grade A buildings provide F&B, wellness, retail, smart building tech, and high security infrastructure – all mostly unavailable in mid-tier assets.
- Multinational corporations insist on LEED and IGBC certifications, effectively ruling out most mid-tier buildings from consideration – even with good location attributes.
- GCCs and financial services companies that operate around the clock need reliable power, IT infrastructure and building management.
|
Office Rental (INR/Sqft/Month) |
|||
|
City |
Q1-2026 |
Q1-2025 |
% Change (Q1-2026 Vs Q1-2025) |
|
Bengaluru |
105 |
95 |
11% |
|
MMR |
152 |
141 |
8% |
|
NCR |
92 |
86 |
7% |
|
Chennai |
80 |
75 |
7% |
|
Hyderabad |
72 |
67 |
7% |
|
Pune |
88 |
83 |
6% |
|
Kolkata |
65 |
62 |
5% |
|
Total |
93 |
87 |
7% |
Source: ANAROCK Research & Advisory
New Supply: Developers Bet on Grade A
The top 7 cities added 52 Mn sq. ft. of new Grade A office supply in 2025, up 8% YoY. The southern markets led with 52% of new supply – Bengaluru added ~14 Mn sq. ft. (+12% YoY), Chennai saw a 72% YoY supply boom (signalling confidence in its tightening fundamentals), and Pune was the national star with 103% YoY growth. Hyderabad saw a 31% drop to ~8.8 Mn sq. ft. on a more conservative phased delivery pipeline.
Interestingly, Q1 2026 saw new office completions decline 18% on an annual basis – from approx. 10.53 Mn sq. ft. in Q1 2025 to approx. 8.60 Mn sq. ft. in Q1 2026. This decline could be partially attributed to the war in West Asia and its impact on the overall global market.
The lack of competition (demand?) for mid-tier projects will further increase as domestic REITs and global investors pour funds into Grade A development.
|
New Office Completion (In Mn Sq. ft.) |
|||
|
City |
Q1-2026 |
Q1-2025 |
% Change (Q1-2026 Vs Q1-2025) |
|
Bengaluru |
2.95 |
3.23 |
-9% |
|
MMR |
1.05 |
0.2 |
425% |
|
NCR |
1.8 |
2.6 |
-31% |
|
Chennai |
1.6 |
0 |
|
|
Hyderabad |
0.2 |
1.3 |
-85% |
|
Pune |
1 |
3.2 |
-69% |
|
Kolkata |
0 |
0 |
|
|
Total |
8.6 |
10.53 |
-18% |
Source: ANAROCK Research & Advisory
Outlook
“The GCC boom will be an almost totally Grade A story – India is expected to have 2,200-2,300 GCCs worth USD 100-110 billion by 2030,” says Peush Jain. “For investors, rental growth and vacancy compression in Grade A assets indicate durable pricing power. The way ahead for mid-tier owners is to selectively upgrade to Grade A or focus on specialised occupier sectors such as domestic SMEs and flex operators, where the competition for Grade A space is less intense.”
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