AI Propels Bengaluru as India's Undisputed Office Market Leader

Bengaluru has solidified its position as the undisputed leader of India's office real estate market, recording a gross absorption of 10.4 million square feet in the first half of 2025.[1] This impressive figure, detailed in a recent report by Savills India, represents a 1% year-on-year increase and accounts for a substantial 27% of the total office space leasing across the country's six major cities.[1] The sustained demand underscores the city's robust economic fundamentals and its enduring appeal as a global technology and business hub. The national office market also showed healthy growth, with total leasing across the top six cities reaching 38.2 million square feet, a 7% annual increase.[2] This performance, set against a backdrop of global economic uncertainties, highlights the resilience and growing confidence within the Indian commercial real estate sector.

The primary engine of Bengaluru's remarkable office market performance remains the technology sector and the consistent expansion of Global Capability Centres (GCCs). According to the Savills report, GCCs were the most significant demand drivers, contributing to nearly 67% of the city's total leasing activity in the first half of the year.[1] This trend reinforces Bengaluru's reputation as a critical hub for global corporations' back-office, research, and development operations.[1] The IT and IT-enabled services (IT-BPM) sector, along with engineering and manufacturing firms, collectively accounted for approximately 60% of all leased space.[1] This demand is not just for any office space; large-scale deals for spaces of 100,000 square feet or more have been a prominent feature, indicating a corporate focus on securing large, high-quality, and scalable office environments.[1] The burgeoning AI industry is also emerging as a key driver, with increasing demand from AI-driven research labs and technology firms expected to contribute to a 5-7% rise in Bengaluru's office rents in 2025.[3] This influx is partly fueled by the Indian government's initiative to establish more AI research facilities, further solidifying the city's status as a nexus for technological innovation.[3]

While Bengaluru leads the charge, other major Indian cities have also demonstrated strong performance in the office leasing market. Delhi-NCR ranked second, recording 6.8 million square feet of gross absorption in H1 2025, with Mumbai following closely at 6.7 million square feet.[2] In Delhi-NCR, the IT-BPM and Banking, Financial Services, and Insurance (BFSI) sectors were the primary drivers, and GCCs accounted for over a quarter of the region's leasing.[1] Mumbai's demand was similarly dominated by technology and financial services occupiers, which together held a 58% share of leasing activity.[2] Chennai also registered a notable 14% year-on-year increase with 5.5 million square feet of gross leasing, fueled by the IT-BPM, BFSI, and flexible workspace sectors.[2] Pune witnessed a massive 2.4 times year-on-year increase in new supply, reaching 7.0 million square feet, the highest half-yearly supply peak in two decades for the city.[2] This surge in supply across cities is a response to growing occupier confidence and a strong pipeline of demand.[2]

Nationally, the office real estate market is demonstrating robust health and a positive outlook. Total Grade A office stock across India now stands at 822.9 million square feet as of the second quarter of 2025, with overall vacancy rates declining from 15.9% to 14.7% over the past year.[2] New supply has also seen a significant 44% year-on-year growth, with 25.3 million square feet of new office spaces completed in the first half of the year.[1] This increase in high-quality supply is crucial for meeting the evolving demands of occupiers who are increasingly focused on sustainability and employee well-being.[4] The market is also seeing a diversification of demand beyond the traditional IT sector, with engineering, manufacturing, and BFSI sectors showing significant activity.[2][5] Flexible workspaces continue to gain traction, contributing 16% to the total absorption, reflecting a broader shift towards agile and hybrid work models.[2][4]

In conclusion, Bengaluru's dominance in India's office market in the first half of 2025, with 10.4 million square feet of leased space, is a testament to its powerful tech ecosystem and its central role in the global operations of multinational corporations.[1] The city's performance, driven largely by the relentless expansion of GCCs and a thriving IT sector increasingly influenced by AI, sets the pace for the rest of the country.[1][3] The broader national market is also on an upward trajectory, with increasing demand, falling vacancy rates, and a healthy pipeline of new, high-quality office spaces.[2] With projections indicating that India's office absorption will exceed 70 million square feet by the end of 2025, the commercial real estate sector, led by its Silicon Valley, appears poised for sustained growth and transformation, continually adapting to the dynamic needs of modern businesses.[2]