Office completions dip 13% due to delays in OCs, project timelines: Report

Cushman & Wakefield report states robust leasing, low supply in most markets helped to bring drop in vacancy rates

New office completions across India’s top eight office markets fell 13 per cent year-on-year (Y-o-Y) in the first quarter (Q1) of 2025 to 10.7 million square feet (msf), down from 12.2 msf recorded during the same period in 2024, according to a report by real estate services firm Cushman and Wakefield.  The report attributed the drop to delays in obtaining occupancy certifications (OC), which pushed project timelines.  An OC is a legal document issued by local authorities certifying that a building complies with approved plans and safety norms, and is suitable for occupancy.  Among the top eight cities, Bengaluru, Pune and Delhi NCR together contributed 9.2 msf — or 92 per cent — of new office supply in the quarter. In contrast, cities like Chennai, Kolkata and Ahmedabad recorded no new completions, leading to lower vacancy rates and higher rentals in these markets.  “Supply constraints and strong occupier demand in the first quarter of the year across India’s top eight office markets have resulted in a drop in the vacancy rate by 55 basis points to 15.7 per cent, from 16.25 per cent in Q4 2024,” the report stated.  Most cities, except Bengaluru and Pune, reported a decline in vacancy as supply lagged demand.  Despite new additions, robust leasing and limited supply in most markets further tightened vacancies, with the office real estate market recording a decline in vacancy rates for a seventh consecutive quarter.  Office leasing activity remained strong, with gross leasing volume (GLV) across the top eight markets rising 5 per cent Y-o-Y to 20.3 msf in Q1 2025.  “Fresh leasing made up nearly 80 per cent of the activity this quarter, marking the third consecutive quarter of this trend and pointing to sustained occupier expansion,” the report noted.  Similarly, net absorption — or the volume of newly occupied office space — increased by 20 per cent Y-o-Y in Q1 2025 to 13.4 msf. Delhi NCR, Mumbai and Bengaluru collectively accounted for 63 per cent of this total.  The first quarter of 2025 also recorded the third-highest quarterly net absorption on record.  By sector, the IT-BPM (information technology-business process management) segment retained its position as the largest occupier of office space, accounting for 29 per cent of GLV. This was followed by banking, financial services and insurance (BFSI) at 22 per cent, while flex space operators maintained a steady 13 per cent share. Global capability centres (GCCs) increased their share to 31 per cent, up from 28 per cent in 2024.  Commenting on the office market’s future outlook, Anshul Jain, chief executive, India, SEA and APAC tenant representation, said: “While we remain watchful of evolving global economic conditions, India’s position as the global hub for technology, research and development, and innovation continues to strengthen.”  “The strong performance of the GCC segment, now contributing over 30 per cent of gross leasing, underscores this confidence, and we expect this trajectory to continue with more greenfield entries and expansion mandates,” he added.  He further noted that domestic economic factors, such as easing inflation and anticipated rate cuts, will support occupier activity.  “With a resilient demand base, rising flex uptake, and healthy supply additions in key micro-markets, we anticipate the office market will maintain its growth footing in the quarters ahead,” he said.