India Office Vacancy Tightens to 13.85% in Q1 2026: Cushman & Wakefield

India’s office real estate market continued to demonstrate underlying strength in Q1 2026, with vacancy levels tightening further on the back of sustained occupier demand and a sharp moderation in new supply across major cities. According to Cushman & Wakefield’s Q1 2026 Office MarketBeat report, office vacancy across the top eight cities averaged 13.85%, declining by ~48 basis points quarter on quarter (QoQ) and ~191 basis points year on year (YoY). 

This has taken vacancy levels below the 14% threshold for the first time since the pandemic, marking the eleventh consecutive quarter of compression.

In terms of cities, Bengaluru continues to operate at sub 8% vacancy, with select micro markets witnessing vacancy levels as low as 2%. Mumbai has also moved into a single digit vacancy phase, with overall vacancy at ~9% and prime business districts recording vacancy of below 3%. Other markets within the top eight cities, including Chennai, Pune and Kolkata, also continued to see a reduction in vacancy rate during the quarter.

The drop in vacancy levels was driven by a combination of steady leasing activity across sectors and constrained supply additions during the quarter. New completions across the top eight cities stood at 8.8 million square feet (MSF) in Q1 2026, reflecting a 43% QoQ and 18% YoY decline, largely due to delays in project completions. Notably, Bengaluru (35%), Delhi NCR (25%) and Chennai (18%) accounted for the bulk of new supply, while Pune, Hyderabad and Kolkata recorded no completions, resulting in faster absorption of available vacant stock across several established office locations.

Supported by declining vacancy levels and limited availability of quality supply, rental growth continued to gain momentum across India’s top office markets. Pan India stock weighted average rents crossed INR 100 per sq ft per month in Q1 2026 for the first time. Hyderabad led rental growth with ~12% YoY appreciation, followed by Delhi NCR (~10%), while Chennai and Mumbai recorded ~6% growth each. Against this backdrop, rental dynamics are likely to remain increasingly landlord favorable across key office micro-markets through 2026.

Meanwhile, the leasing activity remained healthy in Q1 2026, with gross leasing volume (GLV) across the top eight cities reaching ~22 MSF during the quarter, a 13% YoY increase, well above the quarterly average recorded since Q1 2023. 

*GLV, factors in all leasing activity in the market, including fresh take-up, open market renewals by occupiers as well as pre-leasing, and is an indication of overall market activity.

At a city level, Mumbai emerged as the standout performer, recording its highest ever quarterly leasing volume of 6.6 MSF, with renewal led deals accounting for a significant share of the overall leasing activity in the city. Bengaluru and Hyderabad followed at 5.13 MSF and 3.15 MSF, respectively. Delhi NCR recorded 2.80 MSF of leasing during the quarter, while Pune witnessed 2.09 MSF and Chennai accounted for 1.66 MSF. Ahmedabad and Kolkata recorded leasing volumes of 0.30 MSF and ~0.16 MSF, respectively.

Global Capability Centres (GCCs) continued to anchor demand during the quarter, leasing ~8.7 MSF and accounting for nearly 40% of total office take up. Despite a moderation from the previous quarter, GCC leasing recorded a strong 38% YoY growth, making Q1 2026 the second highest quarterly GCC leasing volume on record.

From a sectoral perspective, IT BPM remained the largest contributor, accounting for 23% of total leasing, followed by BFSI at 21%. Flexible workspace operators accounted for a ~18% share, while engineering and manufacturing occupiers contributed ~15%, resulting in a diversified demand base across India’s office markets.

Net absorption stood at 11.51 MSF in Q1 2026, reflecting a 28% QoQ and 24% YoY decline. The moderation was largely on account of softer fresh leasing following a strong end to 2025, along with slower supply completions, which limited the physical realisation of pre committed demand during the quarter.

*Net absorption is a key indicator of real estate demand, representing the net change in occupied office space.

Anshul Jain, Chief Executive – India, SEA, MEA & APAC Office and Retail, Cushman & Wakefield, commented

“India’s office market has carried forward the momentum of 2025 into the first quarter of this year. Gross leasing volume stood at ~22 MSF in Q1 2026, a 13% increase over the same period last year, reflecting a robust demand across sectors. Global Capability Centres, accounting for around 40% of takeup remain a key driver, reinforcing India’s role in long-term portfolio strategies. This continued demand is now translating into tighter market conditions, with vacancy levels declining steadily, reflecting a persistent demand-supply imbalance across key markets, particularly in high-quality assets. Looking ahead, for 2026 we expect ~61 MSF of new supply to come into the market. As much of it will be premium Grade A+, we could see some easing in vacancy levels. However, strong absorption and pre-commitment trends are likely to keep overall vacancy broadly stable, even as rental momentum remains firm. Amid the global uncertainties, recently accentuated due to the West Asia crisis, we are closely assessing how occupiers factor these into their decision-making. And while the pace of expansion may be impacted in the near term, underlying demand in India continues to remain resilient.”

Veera Babu, Executive Managing Director, Tenant Representation - India, Cushman & Wakefield, said:

“The market has entered 2026 with a clear supply-demand imbalance, where sustained occupier interest continues to outpace the availability of quality office space across key markets. This is reflected in the continued tightening of vacancy levels, particularly in Grade A and A+ assets across core micro-markets. Net absorption saw moderation during the quarter, driven by a slower pace of project completions and limited availability of completed space. As new supply progressively enters the market, absorption is expected to pick up, supported by continued demand for quality assets. Slower completion rate of office project in Q1 could also have resulted in limited realization from pre-leased demand, which has resulted in moderation of net absorption, with a healthy fresh supply expected to hit the market in the upcoming quarters, net absorption is expected to improve. Occupiers are increasingly prioritising asset quality, location efficiency and readiness, with a clear preference for buildings that can support evolving workplace, technology and sustainability requirements. We expect vacancy levels to remain tight, especially in high-quality assets across established business districts. ”