India’s business infrastructure is witnessing sustained growth, driven by strong demand for office spaces, warehousing, and data centers. Despite global economic uncertainties and evolving work models, key sectors continue to expand, supported by foreign investments, policy reforms, and the rapid adoption of technology. Read on…
India’s commercial real estate sector has witnessed significant shifts over the past few years, shaped by economic growth, evolving work patterns, and increasing investor confidence. While 2024 saw steady demand for office spaces, a rising preference for flexible workspaces, and strong momentum in retail and warehousing segments, the outlook for 2025 presents a dynamic mix of opportunities and challenges. Sustained economic growth, increasing foreign investments, and expansion into tier-2 and tier-3 cities are expected to drive demand, while factors like global economic uncertainty, high vacancy rates in certain micro-markets, and evolving workforce preferences may pose hurdles. Additionally, the push for sustainability and the adoption of smart real estate solutions will reshape commercial spaces, making adaptability crucial for stakeholders in the sector.
Office space demand remains a key driver of the sector, with Grade A office spaces in prime business districts continuing to attract occupiers, particularly in IT, BFSI, and global capability centers (GCCs). The hybrid work model has fueled demand for flexible office spaces and co-working hubs, while leasing activity in tier-2 and tier-3 cities is gaining traction as companies look beyond metros for cost-effective expansion. According to a recent report by JLL India, in the calendar year 2024, India's office market has become a key hub for global companies expanding their workforce and real estate footprint, as evidenced by a historic peak in net absorption reaching 49.56 million sq. ft. The year concluded with an exceptional fourth quarter (October-December 2024), marked by record net absorption figures of 18.53 million sq. ft, underscoring the robust growth in this sector. The top seven cities’ (Bengaluru, Chennai, Delhi NCR, Hyderabad, Kolkata, Mumbai, and Pune) quarterly net absorption figures had Bengaluru posting its best quarter, while accounting for a 36.1 percent share, signalling the strong occupier demand that remains sustained for this city. Hyderabad jumped to the second spot with a 16.0 percent share followed by Delhi NCR with 15.4 percent and Chennai with 11.5 percent share in the quarterly net absorption numbers. For the full year (January-December 2024), Bengaluru led the charge with 2024 being its best year yet in net absorption terms while Mumbai also saw decadal high numbers. Strong annual performance across Delhi NCR and Hyderabad also contributed to the continued growth momentum in the office market. These four cities accounted for 77.8% share of the annual net absorption number in 2024. “Global companies played a crucial role, driving 58.6% of leasing activity, as India remains central to their real estate expansion plans. Global Capability Centres (GCCs) had a standout year, capturing 35.9% of the market with approximately 28 million square feet leased. As India's position as the 'office to the world' strengthens, its focus on AI and emerging technologies, alongside engineering R&D capabilities, is expected to further propel demand, making it a key destination for headcount growth and innovation over the next decade," said Dr Samantak Das, Chief Economist and Head of Research and REIS, India, JLL.
As per a report by ICRA, it estimates that the net absorption of commercial office leasing across the top six cities (Bengaluru, Chennai, Delhi NCR, Hyderabad, Mumbai Metropolitan Region (MMR) and Pune) in India is likely to increase by 10-11% to 59-60 million square feet (msf) in FY2025 and witness a further growth of 3-4% in FY2026 on a high base. Despite an influx of a huge supply of 125-130 msf in FY2025 and FY2026, the vacancy levels are expected to remain range-bound at 14.5-14.7% by March 2025 and improve to 14.0-14.5% by March 2026, supported by resilient absorption trends.
Demand uptick in industrial & warehousing
India’s warehousing sector continued its robust growth in 2024, driven by the expansion of e-commerce, third-party logistics (3PL), and manufacturing sectors. Increased demand for grade-A warehouses, automation, and multi-modal logistics parks has reshaped the landscape, particularly in key hubs like Delhi-NCR, Mumbai, Bengaluru, Pune, and emerging tier-II cities. Government initiatives such as the National Logistics Policy (NLP) and infrastructure developments under the PM Gati Shakti plan further accelerated growth. According to a report by Colliers, with 25.6 million sq ft of gross leasing in 2024, industrial & warehousing demand across the top five cities remained healthy, witnessing a marginal 2 percent YoY growth. Although, there was a noticeable dip in leasing activity during the last quarter, strong space uptake in the earlier quarters ensured steady leasing levels during 2024. During the year, Delhi NCR led the demand with 26 percent share, closely followed by Chennai at 23 percent share. On a quarterly basis, Q4 2024 saw about 5.5 million sq ft of industrial & warehousing demand across the top five cities. Pune, closely followed by Bengaluru, cumulatively accounted for over half of the quarterly demand. The report further stated, while Third Party Logistics (3PL) players drove overall demand during the year, and accounted for 33 percent share in overall leasing, demand from Engineering and Electronics segments gained traction. At a micro market level, Bhiwandi in Mumbai led the leasing activity in 2024 with about 4.5 million sq ft of demand, followed by Chakan-Talegaon in Pune and Oragadam in Chennai. Both micro markets contributed to more than 2.5 million sq ft of demand each in their respective cities.
According to a report by Savills India, it expect an increase in the warehousing leasing activity in the upcoming quarters, fuelled by new enquiries, the introduction of high-quality supply, and the culmination of pending transactions. Delhi-NCR, Bengaluru, and Chennai are anticipated to be the key drivers of this increasing demand. the report further mentions, to facilitate proximity to a larger population and optimise operational costs, occupiers are anticipated to continue expanding their distribution networks across tier-II and III cities. Chandigarh, Hosur, Jaipur, Lucknow, and Vizag are projected to be the key focal points for warehousing expansion in these Industrial & Logistics emerging regions.
In 2025, the sector is expected to witness continued expansion, with rising demand for built-to-suit (BTS) facilities, cold storage solutions, and ESG-compliant warehouses. The increasing adoption of automation, AI-driven supply chain management, and green warehousing practices will drive efficiency and sustainability. However, challenges such as land acquisition hurdles, rising rental costs, and regulatory complexities could impact growth. Despite this, growing foreign investments and the push for supply chain resilience are likely to keep the sector on a strong growth trajectory.
Data centre market booms
“India's data centre (DC) market continues to experience robust growth driven by digital transformation, increased internet penetration, policy enablers, rising data consumption, and artificial intelligence (AI) adoption. The surge in data traffic from various sectors, combined with 5G deployment, is fuelling demand for reliable data storage and processing facilities. Infrastructure status granted to the DC sector, along with the formulation of the Draft Data Centre Policy, 2020, has created a favourable environment for operators and developers. Additionally, the implementation of the Digital Personal Data Protection Act (DPDPA) in 2023 has bolstered cross-border trade, legitimate data processing, and stakeholder trust, further enhancing India's digital innovation landscape. India's DC capacity has surged over the past four to five years, mirroring the country's rapid digital transformation. As of 9M 2024, the total DC capacity reached approximately 1,255 MW,” says a report by CBRE India
According to a release by Savills India, the demand for data centres in India continues to rise, driven by factors such as the increasing adoption of cloud computing, the expansion of big data, the Internet of Things (IoT), Artificial Intelligence (AI), and the rapid growth of e-commerce and digital transformation initiatives. In 2024, India witnessed an absorption of 407 MW IT capacity and the addition of 191 MW IT capacity across key cities. This demand was fueled by hyperscalers, BFSI (Banking, Financial Services, and Insurance), IT & ITeS, and service sectors, all of which heavily rely on data centre operators for colocation and related services. "India is rapidly emerging as a global data centre hub. The current momentum positions India as a promising global data centre hub. We project a strong demand for data centres in India in 2025, with an estimated demand of over 450 MW IT across major cities, while supply addition is expected to reach 600 MW IT during the same period. The increasing penetration of 5G and the rise in mobile application usage are driving demand for edge data centres in Tier-II and Tier-III cities such as Bhubaneswar, Patna, Lucknow, Jaipur, Kochi, Vizag, Coimbatore, Madurai, Raipur, and Hubli. Meanwhile, dominant Tier-I cities continue to grow. By 2030, we expect data centre stock to reach 3,400 MW IT across major cities,” says Srihari Srinivasan, Director & Lead Data Centre Services, Savills India.
Road Ahead
The future of India's commercial real estate market in 2025 will be shaped by three key factors. Sustainability and ESG compliance will play a crucial role, with a growing emphasis on green buildings, energy-efficient infrastructure, and climate-conscious construction. Investors and occupiers are expected to prioritize ESG-compliant assets, driving demand for sustainable developments and making environmental responsibility a key differentiator in the market. Additionally, technology-driven transformation will redefine commercial spaces, with smart buildings, AI-based facility management, and digital leasing platforms improving operational efficiency and enhancing the tenant experience. The integration of proptech solutions will lead to more data-driven decision-making, space optimization, and predictive maintenance, further strengthening the sector’s long-term resilience. Furthermore, foreign and institutional investments will continue to fuel the sector’s growth. With Real Estate Investment Trusts (REITs) gaining traction, both global and domestic investors will contribute to increased liquidity and transparency in the market, strengthening its long-term stability. The continued influx of private equity investments and foreign direct investments (FDI) in commercial real estate will reinforce India's position as a preferred global business destination.
Despite short-term challenges such as fluctuating interest rates, regulatory shifts, and global economic uncertainties, India’s commercial real estate sector is set to witness sustained growth and innovation. Demand for premium office spaces, flexible work environments, and high-grade warehousing facilities will remain robust, driven by corporate expansions, the rise of e-commerce, and the country’s fast-growing digital economy. The road ahead for commercial realty looks promising, with strong government support, infrastructure development, and the rise of new business hubs in tier-2 and tier-3 cities adding to the sector’s momentum. Continued urbanization, rising consumer spending, and strategic policy interventions will further shape the industry's trajectory. Developers and investors who embrace sustainability, technology, and adaptability will emerge as leaders in this evolving landscape.
As India cements its status as a global business and logistics hub, commercial real estate is set to thrive, innovate, and redefine urban landscapes. The sector's ability to adapt to new trends, leverage technology, and focus on long-term value creation will be key to ensuring sustained success. With collaborative efforts from industry stakeholders, policymakers, and investors, India's commercial real estate sector is well-positioned to scale new heights in the years ahead.
