India’s office real estate market is entering a phase of relative stability, with vacancy levels expected to decline marginally over the medium term, according to a report by Nuvama.

The report said improving rental growth and balanced demand-supply trends are likely to support this moderation. While a large pipeline of commercial projects is underway, the sector is moving towards a more stable phase. “Vacancy levels are likely to decline marginally, and rental growth is expected to pick up pace going forward,” the report noted.

In the near term, however, supply may slightly outpace demand. Around 176 million square feet of new office space is expected to be added by 2028, though actual deliveries could vary depending on labour availability, financing conditions, and developer decisions. Some project delays may also help prevent a sharp rise in vacancies.

During the January- March quarter of 2026, office leasing stood at 11.1 million square feet, down 22 per cent year-on-year. Completions were lower at 7.4 million square feet, leading to a decline in overall vacancy to 13.1 per cent. This marks the tenth consecutive quarter of falling vacancy levels across major cities.

City-Level Trends
Bengaluru continued to lead both demand and supply, recording the lowest vacancy rate at 7.8 per cent. Pune, however, saw a rise in vacancies due to a large upcoming supply pipeline, estimated to be nearly 4.8 times its recent annual demand, making it the only major city to witness an increase during the quarter.

Meanwhile, the National Capital Region and Mumbai Metropolitan Region reported their lowest vacancy levels in over a decade. The report noted that cities such as Pune, Kolkata, and Hyderabad will require stronger demand growth over the next few years to absorb the upcoming supply.

Global Capability Centres remained a key driver, accounting for about 40 per cent of total leasing in the quarter. The IT-BPM sector led demand with a 23 per cent share, followed by banking and financial services at 21 per cent and flexible workspaces at 18 per cent.

Looking ahead, annual office space completions are expected to stabilise at 56–58 million square feet between 2026 and 2028, likely to remain broadly in line with demand and support a gradual decline in vacancy levels.

The report added that the market has shown steady recovery after concerns in early 2023 over weak demand and excess supply, with a strong rebound in 2024 and continued momentum in 2025 supporting leasing activity.