Commercial realty climbs growth ladder, residential one step down

Office, warehousing, industrial segments drive real estate leasing momentum in first half

India’s commercial real estate, which includes office, industrial, and warehousing segments, recorded an increase in absorption in the first half (H1) of calendar year (CY) 2025, even as the residential segment saw a slowdown in sales. 

According to real estate analytics firm Anarock, net office absorption across the top seven Indian cities rose 40 per cent year-on-year (Y-o-Y) to 26.8 million square feet (msf) in January–June 2025, up from around 19.08 msf in the same period in 2024. A report by Knight Frank added that global capability centres (GCCs) led the office market, accounting for 39 per cent of total transactions in H1CY2025 at 19.1 msf, while third-party information technology (IT) services represented 22 per cent, with 10.9 msf. The office market saw strong net absorption and growth in new completions, largely driven by India’s economic resilience, said Peush Jain, managing director for commercial leasing and advisory at Anarock. 

Growth in the office segment was led by upcoming GCCs from the IT/IT-enabled services, coworking, banking, financial services and insurance, consultancy, and e-commerce sectors. 

Among the top seven cities, Bengaluru emerged as the top destination for this segment, accounting for more than 52 per cent of GCC-related leasing activity in the city, according to Knight Frank. “Overall, office leasing by GCCs across cities continues to grow in 2025, with large US-based corporates leasing substantial space across Indian cities,” Jain added. 

Within this segment, Karan Chopra, chairman and co-chief executive officer (CEO) of Table Space, observed a clear preference for managed workspace solutions. “The robust demand underscores how global businesses are now prioritising scale, speed, and certainty, seeking partners who can deliver expansive, compliant spaces without capital expenditure,” Chopra said.

Flexible (flex) space operators also saw 43 per cent Y-o-Y growth in H1CY2025, leasing over 10 msf during the six-month period. Of this, coworking spaces accounted for 76 per cent of total flex space absorption. 

Meanwhile, the industrial and warehousing segment recorded 34 msf of absorption in H1CY2025 — a 24.5 per cent Y-o-Y increase from 27.3 msf in H1CY2024, according to Savills India. 

This was driven by strong demand from the manufacturing segment and sustained interest from third-party logistics players, followed by the e-commerce, fast-moving consumer goods, consumer durables, and retail sectors. 

“A key catalyst is the rapid rise of the e-commerce industry — particularly the growing footprint of quick commerce players — which is reshaping supply chain dynamics. Beyond traditional metropolitan hubs, Tier-II and Tier-III cities are emerging as crucial growth engines,” said Srinivas N, managing director, industrial and logistics, at Savills India. 

In contrast, residential sales in H1CY2025 declined 24.32 per cent Y-o-Y to nearly 190,000 units, amid a spike in property prices and geopolitical tensions, including Operation Sindoor and the Iran-Israel war. 

Anuj Puri, chairman of Anarock group, believes buyer sentiment is starting to recover as domestic tensions ease and the Reserve Bank of India’s repo rate cut brings fresh optimism. “With home loan rates softening and developers largely holding prices steady, the stage is set for a potential upswing in housing sales,” he said. 

The slowdown in absorption and sales was reflected in institutional investments in the sector, which dropped 15 per cent to $3 billion, according to Colliers India. The decline was driven by reduced investments from foreign institutional investors, even as domestic institutional investments rose. Global investors remained cautious amid a shifting macroeconomic landscape, evolving credit flows, and inflationary pressures. 

While foreign investments fell 39 per cent Y-o-Y, domestic capital jumped 53 per cent to $1.4 billion, accounting for 48 per cent of total inflows in H1CY2025. 

“Over 60 per cent of domestic investments during H1CY2025 were directed towards residential and office assets, reflecting sustained confidence in core segments. As domestic capital deepens and diversifies, it is poised to bring greater stability and long-term confidence to India’s maturing real estate ecosystem,” said Badal Yagnik, CEO at Colliers India. 

Residential assets drew $800 million in investments, accounting for 27 per cent of inflows during H1CY2025, followed by office assets at 24 per cent.