Indian Commercial Office Market Set to Reach New Heights in 2025
The Indian commercial office market is projected to reach 65-70 million square feet by 2025, signaling a major transformation. According to the FICCI-Colliers report, the market is witnessing unprecedented growth, driven by various sectors and sustainable
Commercial Office MarketReal EstateFiccicolliersSustainabilityGccsReal Estate NewsFeb 11, 2025
The market has already achieved a record-breaking absorption of 66.4 million square feet in 2024, marking a 14 percent year-on-year growth.
This shift from a supply-led to an occupier-driven market has been solidified by three consecutive years of leasing volumes exceeding 50 million square feet.
Bengaluru has led the charge, recording its highest-ever absorption of 21.7 million square feet in 2024.
Hyderabad has also shown impressive growth, with a 55 percent increase in leasing.
The traditional dominance of the technology sector has waned, dropping from 40-50 percent to 25 percent of total leasing.
In contrast, engineering and manufacturing firms, banking and financial services, and flexible workspace operators collectively account for over half of Grade A office uptake.
Flex spaces have particularly thrived in Delhi-NCR, Hyderabad, and Pune.
Global Capability Centres (GCCs) have emerged as a major driver of demand, with leasing surging 41 percent year-on-year to 25.7 million square feet in 2024.
Bengaluru captured 47 percent of GCC leasing, while Mumbai saw a remarkable fourfold increase in GCC uptake compared to 2023.
Raj Menda, Chairman of the FICCI Committee on Urban Development and Real Estate and Chairman of the Supervisory Board at RMZ Corporation, predicts an 8-10 percent growth in office leasing in FY26, primarily driven by demand from GCCs and the financial services sector.
The market's evolution reflects a fundamental shift in occupier preferences, with sustainability becoming a core consideration.
Over 70 percent of leasing is now concentrated in green-certified buildings, and this is expected to reach 80-85 percent by 2025.
Menda emphasized the importance of sustainability, stating, 'Nearly 80 percent of new supply over the next 2-3 years will be green certified.
By embracing sustainability and innovation, we can create a legacy that extends far beyond bricks and mortar.
We can contribute to the economic growth of our nation, enhance the well-being of our citizens, and leave a lasting impact on the environment.'
The Real Estate Investment Trust (REIT) landscape is also expanding rapidly, with approximately 80 million square feet currently under REITs.
The successful listing of India's first Small & Medium REIT (SM-REIT) in 2024 has opened new avenues for retail investors, with potential REIT-able stock identified at an additional 400 million square feet.
Looking ahead to 2025, the Indian office market is expected to see new supply of 60-65 million square feet, with vacancy levels projected to decline to 15-16 percent.
Average rental values are forecast to reach Rs100-110 per square foot per month.
Gaurav Pandey, Co-Chairman of the FICCI Committee on Urban Development and Real Estate and Managing Director and CEO of Godrej Properties, provided insights into the residential real estate segment, which recorded a milestone in 2024 with demand for 1 billion square feet of space, representing a market size of Rs 8.5 lakh crore.
The sector's growth is highly dependent on execution build-up and talent, including both white-collar and blue-collar jobs.
Developer focus on labor strategy and talent management will be crucial for sustained growth.
On the investment front, institutional inflows reached USD 4.7 billion in the first nine months of 2024, with over 60 percent directed towards industrial, warehousing, and residential assets.
The recent budget announcement of an Urban Challenge Fund worth Rs 1 lakh crore aims to transform cities into growth hubs and improve infrastructure.
Vipul Roongta, Co-Chairman of the FICCI Committee on Urban Development & Real Estate and Managing Director and CEO of HDFC Capital Advisors, cautioned about affordability challenges in the residential segment, noting that the average unit price of Rs 1 crore in major cities poses accessibility issues for the emerging middle class, who can typically afford homes in the Rs 50-75 lakh range.
Sriram Khattar, Vice Chairman & Managing Director of Rental Business at DLF, highlighted the shift in focus from quantity to quality in commercial real estate.
'Gone are the days where one could build commercial offices at 70, 80 square feet per desk and sort of fill up the place.
The emphasis is now on the quality of the real estate that is provided for to the occupiers and their employees.'
Arpit Mehrotra, Managing Director of Office Services at Colliers India, added, 'The occupier-driven Indian office market will continue to diversify throughout 2025, and developers will become increasingly agile in catering to evolving preferences.'
Frequently Asked Questions
What is the projected size of the Indian commercial office market in 2025?
The Indian commercial office market is projected to reach 65-70 million square feet in 2025.
Which city led in office leasing in 2024?
Bengaluru led in office leasing in 2024 with the highest-ever absorption of 21.7 million square feet.
What percentage of office leasing is now concentrated in green-certified buildings?
Over 70 percent of office leasing is now concentrated in green-certified buildings, and this is expected to reach 80-85 percent by 2025.
Which sectors are driving the demand for office space in India?
Global Capability Centres (GCCs), banking and financial services, engineering, and manufacturing firms are driving the demand for office space in India.
What is the average rental value forecast for 2025 in the Indian office market?
The average rental value is forecast to reach Rs100-110 per square foot per month in 2025.
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