India's office sector is expected to maintain its strong growth momentum in 2025, according to the CBRE South Asia's 2025 India Market Outlook report. This growth will likely be driven by resilient economic fundamentals, a firm employment outlook, a readily available talent pool, and favourable government policies, including relaxation of SEZ denotification norms, boosting occupiers' confidence in expanding their real estate portfolios.
The office sector has witnessed healthy supply growth over the past few years and is anticipated to maintain this momentum in 2025, underpinned by a robust pipeline of under-construction projects. Development completions would primarily be led by high-quality investment-grade assets, with ~60-65% of the new supply likely to be a part of integrated tech parks within top cities during the year. Developers increasingly focus on fully amenitised, green-certified assets in line with occupiers’ evolving preferences.
While established hubs including Bengaluru, Hyderabad, Delhi-NCR, and Mumbai remain highly attractive, other key cities such as Chennai and Pune are poised to gain further traction due to the influx of strategically located quality supply, readily available talent pool, and occupier strategies focused on diversifying beyond gateway markets. This trend is also likely to stimulate leasing activity in tier-II cities.
In 2025, the Indian office sector is expected to be heavily influenced by the premiumisation trend, as developers and occupiers prioritise top-tier facilities and amenities. Developers are adapting to the changing demands of contemporary businesses by focusing on cutting-edge facilities and extensive amenities. These include convenient access to public transportation and pedestrian-friendly surroundings, superior architectural designs, outdoor green spaces with optimal air quality, various food and beverage choices, and community-building events. The growing number of large-scale buildings indicates a shift towards integrated or mixed-use developments, which aim to provide a comprehensive environment for work and personal life.
India Inc.'s office leasing momentum will continue its upward trajectory in 2025. Domestic companies demonstrated a strong recovery in office leasing during 2023-2024, with an 86% increase compared to the pre-pandemic period (2018-2019). This surge was driven by heightened business confidence, expansion, and digitalisation. According to CBRE’s 2024 India Occupier Survey, 78% of domestic occupiers plan to expand their portfolios by 10% or more within the next two years, further fueling demand for quality office real estate. This trend will likely persist as firms pursue growth by strategically expanding into new markets.
Flexible space operators are also poised for continued growth in 2025, driven by sustained demand for agility and flexibility in office portfolios and leases. Domestic technology firms are expected to be key drivers of leasing activity as they seek access to broader talent pools and aim to diversify their geographical risk. Similarly, domestic banks are anticipated to expand their office footprints to support the growth of technology-integrated services and customer support teams.
The demand for office space across multiple sectors will strengthen as India’s corporate landscape expands. The technology sector will likely lead leasing activity, particularly in specialised fields such as artificial intelligence, machine learning, data analytics, and cloud computing. Additionally, the continued growth of the BFSI and E&M sectors, with a focus on digitalisation and new service offerings, will contribute significantly to leasing demand.
Furthermore, global companies are expected to ramp up their GCC (Global Capability Centers) leasing in India, positioning these centres as strategic hubs or second headquarters. As companies tap into India’s extensive talent pool, the expansion and consolidation of existing GCCs, along with the entry of new firms, will further boost office leasing activity. CBRE predicts that by 2025, GCCs will account for around 35-40% of total office space absorption in top cities across India.
In 2025, capital inflows into India’s real estate sector are expected to remain robust, continuing the positive momentum seen in 2024. Both domestic and international funds are showing strong interest, bolstered by substantial dry powder available for deployment in key sectors like office spaces, industrial, and logistics (I&L). Additionally, the growing acquisition pipelines for retail assets and residential development sites further support this optimistic outlook. Government reforms, corporate restructuring, and improving macroeconomic conditions are expected to drive growth in India’s mergers and acquisitions (M&A) and private equity (PE) landscape, making the country an attractive destination for foreign investments, even amidst global uncertainties. The recent correction in public markets has created a more favourable environment for capital deployment, as the realignment of seller-buyer valuation expectations aligns with investor strategies.
The office sector is poised for a significant uptick in investment activity in 2025, with both investment-grade and semi-investment-grade assets attracting attention. Prominent domestic fund houses are pursuing office acquisitions with a value-added approach, and this trend is expected to continue as they raise and deploy capital. While global institutional investor interest in office markets has been tepid, India is an exception, as evidenced by a 4X year-on-year growth in foreign institutional inflows in 2024. This trend is expected to continue, with global funds likely to explore opportunities in India's office market in the first half of 2025, culminating in several transactions by the year's end.
In addition, mixed investment strategies, such as acquiring growth or controlling stakes and implementing credit strategies, are expected to maintain their momentum in 2025, following numerous such transactions in the prior year. These strategies reflect investor confidence and long-term commitment to India's real estate market.
Another emerging trend is the rise of small and medium real estate investment trusts (SM REITs). Unlike traditional REITs that require larger portfolios, these provide a flexible listing option for smaller asset portfolios (up to Rs 500 crore). This structure enables phased listings and offers an exit strategy for mid-sized asset developers who face challenges attracting large funds or buyers beyond strata sales. The success of SM REITs will hinge on delivering competitive returns, ideally surpassing those of strata sales, which is expected to generate investor interest and fuel broader market adoption in 2025 and beyond.
