India’s office vacancy drops to 13.85% in Q4FY26, lowest since pandemic amid strong leasing demand

New Delhi: Office vacancy across the top eight cities is at its lowest in Q426, since the pandemic as corporates fully returned to work and GCCs continue to lease office space despite the geopolitical tension.

The vacancy averaged 13.85%, declining by 48 basis points quarter‑on‑quarter (QoQ) and 191 basis points year‑on‑year (YoY), against 17.93% in Q423, according to Cushman & Wakefield’s data.

“India’s office market has carried forward the momentum of 2025 into the first quarter of this year. This continued demand is now translating into tighter market conditions, with vacancy levels declining steadily, reflecting a persistent demand-supply imbalance across key markets, particularly in high-quality assets,” said Anshul Jain, Chief Executive – India, SEA, MEA & APAC Office and Retail, Cushman & Wakefield.

The vacancy levels are below the 14% threshold for the first time since the pandemic, marking the eleventh consecutive quarter of compression.

In terms of cities, Bengaluru continues to operate at sub‑8% vacancy, with select micro‑markets witnessing vacancy levels as low as 2%. Mumbai has also moved into a single‑digit vacancy phase, with overall vacancy at 9% and prime business districts recording vacancy of below 3%.

Other markets within the top eight cities, including Chennai, Pune and Kolkata, also continued to see a reduction in vacancy rate during the quarter.

“The market has a supply-demand imbalance, where sustained occupier interest continues to outpace the availability of quality office space across key markets. This is reflected in the continued tightening of vacancy levels, particularly in Grade A and A+ assets across core micro-markets,” said Veera Babu, Executive Managing Director, Tenant Representation - India, Cushman & Wakefield.

The drop in vacancy levels was driven by a combination of steady leasing activity across sectors and constrained supply additions during the quarter.

“We believe India’s office market is in the middle of a genuine structural shift, not just another cycle. Demand remains strong, but we also have to be realistic — prolonged geopolitical tensions can push up energy, logistics and fit-out costs, even if the world eventually learns to adapt. At the same time, AI is reshaping the traditional IT services model, and that has a direct impact on headcount-led office demand in India. The opportunity now is to build the right quality of workplace for a more selective and evolving occupier base,” said Vibhor Jain, Founder & CEO, CG.

New completions across the top eight cities stood at 8.8 million square feet (MSF) in Q1 2026, reflecting a 43% QoQ and 18% YoY decline, largely due to delays in project completions.

This lead to faster absorption of available vacant stock across several established office locations.

Supported by declining vacancy levels and limited availability of quality supply, rental growth also gained momentum across India’s top office markets. Pan‑India stock‑weighted average rents crossed Rs 100 per sq ft per month in Q1 2026 for the first time.

In Q1 2026, gross leasing volume (GLV) across the top eight cities reached 22 MSF during the quarter, a 13% YoY increase, well above the quarterly average recorded since Q1 2023.

Global Capability Centres (GCCs) continued to anchor demand during the quarter, leasing 8.7 MSF and accounting for nearly 40% of total office take‑up. Despite a moderation from the previous quarter, GCC leasing recorded a strong 38% YoY growth, making Q1 2026 the second‑highest quarterly GCC leasing volume on record.

From a sectoral perspective, IT‑BPM remained the largest contributor, accounting for 23% of total leasing, followed by BFSI at 21%. Flexible workspace operators accounted for a 18% share, while engineering and manufacturing occupiers contributed 15%, resulting in a diversified demand base across India’s office markets.