Bengaluru witnesses 28% drop in gross office space leasing in Q1 2025: C&W

Bengaluru real estate: The IT capital saw a 28% drop in gross office space leasing to 4.8 mn sq ft during January-March this year, Cushman & Wakefield said

Bengaluru’s office real estate market recorded a 28% drop in gross leasing to 4.8 million sq ft during January to March 2025, compared to 6.7 million sq ft in the same period a year ago, according to a report by Cushman & Wakefield.

Bengaluru’s office real estate market recorded a 28% drop in gross leasing to 4.8 million sq ft during January to March 2025, compared to 6.7 million sq ft in the same period a year ago, according to a report by Cushman & Wakefield. (Picture for representational purposes only) (Pexels)

The net leasing of office space declined in Bengaluru by 33% to 2.4 million sq ft in January-March 2025, compared to 3.6 million sq ft in the corresponding period of the last year.

"While quarterly gross leasing was lower on an annual basis, the city remained the premier destination for global capability centres (GCC) of multinational corporations. GCC transactions accounted for around 48% of quarterly gross leasing with multinationals across various sectors taking up large spaces," the report said.

Despite the drop in leasing, the city saw a 52% increase in new office supply, reaching 3.2 million sq ft in Q1 2025 compared to 2.1 million sq ft last year. The vacancy rate stood at 9.7% for the quarter.

The eight cities included Delhi-NCR, Mumbai, Kolkata, Chennai, Bengaluru, Pune, Hyderabad and Ahmedabad.

IT-BPM (32%), BFSI (22%) and engineering and manufacturing (17%) were the top three sectors during Q1, with flex operators (11%) continuing to expand their footprint. The Outer Ring Road (ORR) submarket contributed over 70% of Q1 gross leasing, with Peripheral South at a distant second spot (9%). Net absorption stood at 2.5 msf in the quarter, driven by fresh space demand and operationalisation of projects with precommitments, it noted.

New office space completions in Q1 2025 touch 10.7 mn sq ft

The total new office completions in the first quarter of 2025 stood at 10.7 million sq ft (msf), down by 13% YoY and 27% QoQ, falling short of expectations due to delays in occupancy certifications and project timelines, the report said.

Bengaluru, Pune (3.21 msf) and Delhi-NCR (2.71 msf) contributed a combined 86% (9.2 msf) of the new completions. Hyderabad recorded 1.32 msf of completions, while Mumbai registered 0.18 msf. Cities like Chennai, Kolkata and Ahmedabad recorded no new supply, resulting in lower vacancy rates and higher rentals in these markets, the report said.

"Supply constraints and strong occupier demand in the first quarter of the year across India’s top eight office markets have resulted in a drop in vacancy rate by 55 basis points (bps) to 15.7% from 16.25% in Q4 2024," the report said.

Mumbai recorded the largest quarter-on-quarter drop in vacancy, down by 227 basis points. Kolkata followed with a 140-basis-point decline. Except for Bengaluru and Pune, all major markets experienced a decrease in vacancy rates due to supply shortages, the report said.