Record Office Leasing: GCCs, Green Buildings, & Domestic Capital Drive India’s Commercial Real Estate to a 2025 High

The Indian Commercial and Office Space sector demonstrated unprecedented resilience and robust growth during the week of October 5–11, 2025, buoyed by the release of several key Q3 2025 market reports. The central theme emerging is the market’s trajectory towards a record-breaking year for office leasing, underpinned by strong demand from Global Capability Centres (GCCs), a significant shift toward sustainability, and a notable comeback in institutional investment, particularly from domestic sources.

1. Office Leasing Momentum Hits New Peak

The most significant takeaway from the week’s reports is the record-high office space absorption achieved in the first nine months of 2025 (9M 2025).

1.1 Record Absorption and Growth Drivers

• Highest-Ever Leasing: The Indian office market recorded a gross absorption of approximately 59.6 – 66.7 million square feet (msf) across major cities in 9M 2025, which is the highest level ever recorded for this period. Industry experts now project that the total annual leasing activity for 2025 could reach a new high of around 85-90 million sq ft.
• The GCC Powerhouse: Global Capability Centres (GCCs) remain the primary engine of demand, accounting for approximately 32% to 39% of the total leasing volume in 9M 2025. This surge underscores India’s strategic importance as a hub for global business process and technology operations.
• Top Occupiers: While GCCs lead the charge, Technology firms, Flexible Space Operators (Co-working), and the BFSI (Banking, Financial Services, and Insurance) sector collectively accounted for the majority of the leasing activity.
• Flight-to-Quality: Occupiers continue to show a sustained preference for Grade A++ and premium assets. This ‘flight-to-quality’ is driving new supply, with developers focusing on delivering high-quality, amenity-rich, and green-certified buildings.

1.2 City-Specific Trends

The dominance of major Southern and Western markets continued, with some emerging cities also showing remarkable growth:

City	9M 2025 Leasing Share (Approx.)	Key Highlights
Bengaluru	25% (Leading the nation)	Maintained its leadership, particularly dominating GCC-led transactions.
Mumbai	19% (Strong performance)	Saw a healthy absorption rate and a strong surge in office investment activity.
Delhi-NCR	17%	Continued to be a significant contributor, though some reports indicate a minor softening in Q3 leasing activity.
Pune	Strong Growth	Both cities recorded robust growth in leasing, heavily anchored by GCC demand. Hyderabad, in particular, saw impressive year-on-year growth.
Kolkata	Record High	Witnessed a record 1.5 msf leased in 9M 2025, primarily driven by the technology sector and a push to localise the workforce.

2. The Institutional Investment Comeback

Another highlight of the week was the confirmation of a strong recovery in institutional investments into the office segment in Q3 2025.

• Office Investment Surge: Institutional investment in Indian office real estate saw a sharp recovery, posting a 27% year-on-year (Y-o-Y) jump in Q3 2025 to approximately $0.8 billion. This segment contributed over 60% of the total quarterly inflows.
• The Domestic Capital Shift: A structural change is underway, with domestic capital leading the investment charge. Domestic institutional funds and developers’ equity have shown increased depth and confidence, with domestic capital surging 52% Y-o-Y to surpass foreign investments in the first nine months of the year.
• Investment Focus: Inflows were primarily directed towards land/development sites and built-up Grade A office and retail assets. The increased interest is a direct result of the strong leasing activity and occupiers’ sustained demand for high-quality properties.
• Record Real Estate Equity: Overall equity investments in Indian real estate rose 48% to $3.8 billion during the July–September 2025 quarter, indicating renewed confidence and capital deployment across residential, commercial, and mixed-use segments.

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3. Sustainability and REITs: Structural Drivers

Two structural trends are set to reshape the market’s future: the push for sustainability and the maturation of the REIT market.

3.1 Green Buildings: The New Norm

• Demand for Green: Sustainability has moved from a niche requirement to a standard expectation. Over 70% of new office space completed in Q3 2025 was green-certified, and a similar percentage of leasing activity took place in such environmentally certified buildings. This trend is expected to strengthen, with nearly 80-85% of new supply slated to be green-certified in the coming years, reflecting corporate ESG (Environmental, Social, and Governance) goals.

3.2 REIT Reclassification: A Game-Changer

• SEBI’s Transformational Move: The Securities and Exchange Board of India’s (SEBI) recent decision to reclassify Real Estate Investment Trusts (REITs) from hybrid to equity instruments was a major news point, with its positive impact being discussed across the industry.
• Alignment with Global Standards: This reclassification brings Indian REITs in line with global practices, potentially enabling their inclusion in equity indices (like Nifty 500 and MidCap 150).
• Boosting Liquidity and Investment: Experts anticipate this move will act as a catalyst for the next phase of REIT growth, unlocking significant passive and institutional capital flows from mutual funds and global index trackers, improving liquidity, and potentially leading to a valuation re-rating for listed REITs.

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4. Market Outlook and Implication for Tenants/Investors

The week’s news confirms a bullish outlook for India’s Commercial Office Space market.

• Rental Growth and Vacancy: With leasing activity consistently outpacing new supply, vacancy rates are declining (currently around 14.5% to 16%), and average rental values are forecast to rise in major Tier-I cities like Kolkata (leading the growth), Mumbai, and Bengaluru. The market is firmly shifting from being supply-driven to one led by strong occupier demand.
• Periphery Market Growth: The sustained preference for high-grade supply is driving growth in peripheral locations of major cities, as developers infuse high-quality stock into these areas.
• Resilience Confirmed: India’s commercial real estate sector is proving resilient, decoupling from a temporary slowdown observed in the residential segment and against a backdrop of complex global economic conditions. The strong domestic economy and deep talent pool continue to make India a strategic location for global corporate expansion.

The combination of record leasing, domestic capital dominance, and a structural shift towards institutional and sustainable assets firmly positions the Indian office market for sustained, high-growth momentum through the remainder of 2025 and into 2026.