Bengaluru, Delhi-NCR, Mumbai office space rents cross Rs 100/sq ft as leasing slows

India’s commercial real estate market is witnessing a sharp divergence between rising rentals and slowing leasing activity, highlighting structural shifts in demand and supply dynamics. According to Knight Frank, average monthly office rentals in Bengaluru and Delhi-NCR have crossed the ₹100 per sq ft mark for the first time, joining Mumbai where rents are already well above this level.

In Mumbai, office rents rose 6% year-on-year to ₹125 per sq ft, while Delhi-NCR saw a sharper 15% jump to ₹105 per sq ft. Bengaluru recorded a 7% increase, taking rents to ₹100.6 per sq ft. Other cities such as Pune, Hyderabad, and Chennai also saw steady rental growth ranging between 5% and 8%.

This broad-based increase underscores a sustained rental upcycle that has been in place since 2022, largely driven by limited supply of Grade-A office spaces.

Demand outpaces supply

The primary driver behind rising rents is a persistent gap between demand and supply. Knight Frank data shows that office space leasing reached a record 29.9 million sq ft in Q1 2026, up 6% year-on-year. However, new supply stood at just 14 million sq ft — less than half of the space absorbed during the quarter.

This imbalance has led to tightening vacancy levels, which have declined from 17.2% in 2021 to 13.9% in early 2026.

Developers, meanwhile, have been prioritising residential projects over commercial developments due to faster sales cycles and lower capital intensity. This has further constrained office supply, particularly in premium micro-markets.

Do checkout: Dubai realty shock: 30% index crash masks deeper stress, says expert

Leasing activity

However, a parallel trend is emerging. Data from Cushman & Wakefield indicates that leasing activity has slowed significantly in major markets like Delhi-NCR and Mumbai.

Net leasing across these two cities declined 51% year-on-year to 3.28 million sq ft in Q1 2026. Delhi-NCR saw a steep 61% drop, while Mumbai recorded a 38% decline. Across eight major cities, net leasing fell 24% to 11.51 million sq ft.

The slowdown has been attributed largely to lower fresh supply rather than a collapse in demand. Limited availability of quality office spaces is restricting transaction volumes, even as occupier interest remains intact.

Rental growth

Interestingly, rents have continued to rise despite weaker leasing numbers. In Delhi-NCR, rentals increased 2–5% quarter-on-quarter and 6–9% annually, with Gurugram’s central business district witnessing the strongest growth of up to 15%.

Mumbai also recorded a 1.5% sequential increase in rents, reaching ₹171 per sq ft in key corridors such as Andheri-Kurla Road and Thane-Belapur Road.

This trend indicates that landlords continue to retain pricing power due to limited Grade-A supply and sustained demand from sectors like GCCs, BFSI, and technology firms.

As the report notes, “Sustained demand for quality office spaces is expected to exert upward pressure on Grade-A rents over the coming quarters.”

MUST READ: Is Greece the new Dubai? Why HNI Indians are shifting their investments

What it means for the office market

The current market dynamics suggest that India’s office sector is not witnessing a demand slowdown but rather a supply-constrained phase.

For occupiers, this means higher rental costs and increased competition for premium spaces. For investors and developers, it signals an opportunity to expand office portfolios, especially in high-demand micro-markets.

At the same time, the divergence between leasing volumes and rental growth points to a more nuanced market—where demand remains resilient but is being shaped by availability constraints.

Going ahead, a revival in new office supply will be critical to sustaining transaction volumes. Until then, rents are likely to remain on an upward trajectory, reinforcing the strength of India’s commercial real estate cycle.