Mumbai: 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% |
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% |
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.
| 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
