India's office leasing activity across its top eight cities experienced a 6% decline in the third quarter of 2025, according to Knight Frank's latest report. This downturn, attributed to global economic uncertainties, contrasts with the robust performance observed in the first half of the year. Despite this quarterly dip, the overall leasing volume for 2025 is projected to surpass previous records, underscoring the resilience of India's commercial real estate sector.
Quarterly Dip in Leasing Activity
Knight Frank's report highlights a 6% year-on-year decrease in office leasing across Bengaluru, Delhi-NCR, Mumbai, Pune, Hyderabad, Chennai, Kolkata, and Ahmedabad during July to September 2025. This decline is primarily attributed to global economic uncertainties, including geopolitical tensions and fluctuating commodity prices, which have led to cautious expansion strategies among occupiers. Notably, Bengaluru and Delhi-NCR, which had previously shown strong leasing activity, experienced a slowdown during this period.
Year-to-Date Performance Remains Strong
Despite the quarterly downturn, the cumulative office leasing activity for the first three quarters of 2025 remains robust. The total leasing volume has surpassed 60 million square feet, indicating a 20% year-on-year increase compared to the same period in 2024. This sustained demand is driven by several factors, including the expansion of Global Capability Centres (GCCs), the adoption of hybrid work models, and the growing preference for Grade A office spaces.
Sectoral Demand Dynamics
The demand for office space continues to be led by the Information Technology (IT) and Business Process Management (BPM) sectors, which collectively accounted for over 50% of the leasing activity in 2025. Additionally, sectors such as banking, financial services, and insurance (BFSI), as well as manufacturing and engineering, have shown increased leasing interest, particularly in emerging business districts.
Regional Variations
Regional markets have displayed varying performance trends. Chennai, for instance, has witnessed a significant surge in leasing activity, with a 57% year-on-year increase in the first half of 2025. In contrast, cities like Ahmedabad and Kolkata have experienced more modest growth, reflecting the diverse dynamics within India's office leasing market.
Outlook for the Remainder of 2025
Looking ahead, Knight Frank projects that the Indian office leasing market will achieve a record high by the end of 2025, surpassing the previous peak of 72 million square feet recorded in 2024. Factors contributing to this optimistic outlook include the ongoing digital transformation across industries, the government's push for infrastructure development, and the continued attractiveness of India as a destination for foreign direct investment.
Conclusion
While the third quarter of 2025 saw a temporary dip in office leasing activity across India's top eight cities, the overall market remains on a growth trajectory. The resilience demonstrated by the sector amidst global economic challenges underscores the strength and adaptability of India's commercial real estate market. With sustained demand and positive economic indicators, the office leasing sector is poised for continued growth in the coming quarters.
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