The first quarter of the 2025 calendar year did not bode well for office leasing in Hyderabad and Kolkata. These two cities lagged behind the other top five cities in Grade A new supply at -88 percent (with 0.3 million sq ft in Q1 2025 compared to 2.6 million sq ft in Q1 2024) and -50 percent (from 0.2 million sq ft in Q1 2024 to 0.1 million sq ft in Q1 2025), respectively.
The top seven cities taken into consideration are Bengaluru, Chennai, Delhi NCR, Hyderabad, Kolkata, Mumbai and Pune.
Delhi NCR, however, led the entire pack with an increase of 440 percent. In Q1 2024, it was 0.5 million sq ft, but it rose to 2.7 million sq ft in Q1 2025. The second highest was Pune with 150 percent growth (from 1.0 million sq ft in Q1 2024 to 2.5 million sq ft in Q1 2025).
Pan-India, it was -11 percent, sliding from 10.0 million sq ft in Q1 2024 to 9.9 million sq ft in Q1 2025, according to a report by Colliers, a leading diversified professional services company specialising in commercial real estate services, engineering consultancy, and investment management.
Space absorption
When it came to space absorption, the quarter was not good for Hyderabad and Kolkata. Hyderabad slid by 41 percent (from 2.9 million sq ft in Q1 2024 to 1.7 million sq ft in Q1 2025). Kolkata fared much worse than Hyderabad with a 50 percent slide (from 0.2 million sq ft to 0.1 million sq ft). Chennai stood first with 92 percent growth (from 1.5 million sq ft in Q1 2024 to 2.9 million sq ft in Q1 2025). Pan-India, there was an increase of 15 percent (from 13.8 million sq ft to 15.9 million sq ft).
Office leasing across the top seven markets remained strong in Q1 2025 at 15.9 million sq ft, reflecting a 15 percent year-on-year (YoY) increase.
While Delhi NCR saw its highest quarterly leasing in the last 10 quarters, Chennai also witnessed a remarkable 93 percent YoY surge at 2.9 million sq ft, driven by space take-up by technology firms. This sustained demand growth underscores the continued resilience of the country’s top seven markets.
Arpit Mehrotra, Managing Director of Office Services, India, Colliers, said: “2025 has started on a positive note, with office leasing witnessing a commendable 15 percent year-on-year growth at 15.9 million sq ft in the first quarter. Key markets are seeing a strong Grade A space uptake, driven by corporate expansions, rising investments in commercial real estate, and promising domestic growth prospects. We anticipate the demand momentum to gain pace throughout 2025, fuelled by expansionary plans of leading firms across the Technology, Engineering & Manufacturing, and BFSI sectors. Aided by the policy-level push in major states, long-term demand for GCCs will continue to remain strong in most Tier I and select Tier II cities of the country.”
New supply
Overall new supply touched 9.9 million sq ft during Q1 2025, almost at par with the same period last year. Bengaluru and Delhi NCR together drove two-thirds of the new supply during Q1 2025.
While the majority of the markets saw a decline in new supply on an annual basis, Delhi NCR and Pune witnessed multifold growth in new completions compared to Q1 2024. In fact, almost 90 percent of the new supply during Q1 2025 was concentrated in three cities — Bengaluru, Delhi NCR, and Pune.
With demand outpacing new supply across most cities, average office rentals increased annually by eight percent during Q1 2025. Amid limited new supply, growth in rentals was higher in select high-activity micro markets such as BKC & Andheri East in Mumbai, SBD (Madhapur, HITEC City, Kondapur & Rai Durg) in Hyderabad, and NH 48 & Golf Course Extension Road in Delhi NCR.
At the national level, vacancy levels dropped by 120 basis points on an annual basis to 16.2 percent. This was a 55-basis-point decline on a sequential basis.
Technology firms drove conventional office space demand; flex space leasing remained buoyant in Q1 2025,
Grade A office space demand
Of the 15.9 million sq ft of Grade A office space demand in Q1 2025, 86 percent came from conventional workspaces. Flex space leasing, meanwhile, at 2.2 million sq ft, witnessed a 22 percent YoY growth.
The technology sector continued to drive office space demand, leasing 4.4 million sq ft of conventional office space during Q1 2025, accounting for 28 percent of the total demand during the quarter. BFSI and Engineering & Manufacturing demand was also healthy at 3.4 million sq ft and 2.4 million sq ft, together accounting for 36 percent of the total space uptake in the quarter.
“Q1 2025 saw 2.2 million sq ft of flex space leasing across the top seven cities of the country, a 22 percent YoY increase. Leasing by flex space operators was particularly strong in Delhi NCR, Pune, and Bengaluru, with these three cities together accounting for almost 80 percent of the total flex space uptake in the quarter. Fully managed office spaces — driven by enterprise-level offerings, plug-and-play facilities, and a high degree of customisable solutions — are expected to drive flex space momentum throughout 2025,” said Vimal Nadar, Senior Director and Head of Research, Colliers India.
“Consequently, flex spaces are likely to gain further prominence, and their share in occupiers’ portfolios could potentially reach 12-15 percent in the coming years,” he added.
