Office market stabilising; vacancies to decline marginally, rents to rise: Nuvama

New Delhi [India], April 20 : Office space vacancy levels in India are expected to ease slightly over the medium term, supported by improving rental growth and balanced demand-supply trends, according to a report by Nuvama.

The report said that while a large pipeline of commercial projects is underway, the sector is entering a phase of relative stability. "Vacancy levels are likely to decline marginally, and rental growth is expected to pick up pace going forward," it 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. Actual deliveries could vary depending on factors such as labour availability, financing conditions, and developer decisions. Some projects may also be delayed, which could help prevent a sharp rise in vacancies.

During the first 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.

Bengaluru continued to lead both demand and supply, recording the lowest vacancy rate at 7.8 per cent. Pune, on the other hand, faced pressure due to a large upcoming supply pipeline, nearly 4.8 times its recent annual demand, making it the only major city to see a rise in vacancies during the quarter.

Meanwhile, the National Capital Region and Mumbai Metropolitan Region reported their lowest vacancy levels in over a decade.

The report highlighted that cities like Pune, Kolkata, and Hyderabad will need stronger demand growth over the next few years to absorb the upcoming supply.

Global Capability Centres (GCCs) 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. This is likely to be broadly in line with demand, supporting 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. A strong rebound in 2024 and continued momentum in 2025 helped drive record leasing activity and improve overall market conditions.

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