India office leasing falls 3.9% in H1 despite record net absorption: JLL

Office leasing fell 3.9 per cent in H1 2026 amid geopolitical uncertainty and AI-led business changes, while net absorption reached a record high, according to JLL

Geopolitical disturbances and artificial intelligence (AI)-driven business changes slowed India's office leasing in H1 2026 to 37.9 million square feet (msf), down 3.9 per cent year-on-year (Y-o-Y), as companies strategically right-sized portfolios and aligned headcount projections with their long-term vision.

 

The country's biggest office markets of Bengaluru and Delhi NCR recorded more than a 20 per cent Y-o-Y drop in leasing despite high absorption, according to a report by real estate consultancy JLL.

 

On the other hand, markets such as Hyderabad and Mumbai witnessed a 17.6 per cent and 17.8 per cent rise in leasing, respectively.

 

Industry watchers said slippages in transaction closures due to the uncertain business environment had also resulted in deferred decision-making, contributing to the drop in leasing.

   

Gross leasing refers to all lease transactions recorded during a period, including confirmed pre-commitments, but does not include term renewals and deals in the discussion stage.

 

Despite the slow momentum, the January-June period was the second-highest six-month period by leasing volumes recorded, following H1 2025. This, the report stated, was on the back of global capability centres (GCCs), which leased 15.8 msf, accounting for a 41.7 per cent share of India's total leasing activity in the last six months.

 

“Within GCCs, tech and BFSI dominated the leasing activity, followed by the manufacturing segment during the H1 period this year,” the JLL report added.

 

Radha Dhir, chief executive officer (CEO), India, at JLL, said the country is witnessing unprecedented expansion from the BFSI and manufacturing sectors, alongside new entrants from the retail, logistics, infrastructure, and aerospace domains, as GCCs continue to leverage Indian skilled talent in AI, data science, and digital engineering.

 

The flex sector followed closely behind GCCs, with a 28.4 per cent share of total leasing. “Driven by a strong performance by flex operators, domestic occupiers saw their share (versus MNCs) in the quarterly leasing hit 47.3 per cent, the highest in the last nine quarters,” the report said.

 

It added that while near-term leasing volumes reflect measured caution driven by geopolitical uncertainty, India's structural advantages, exceptional talent pool, a thriving innovation ecosystem, and compelling cost arbitrage position the country for sustained office market growth.

 

Consequently, India's office sector saw an 11.6 per cent Y-o-Y rise in net absorption in H1 2026 to 26.9 msf. This is the highest-ever absorption figure compared to all previous first-half periods recorded by JLL.

 

Similarly, pan-India vacancy rates across Tier-I office markets fell by 160 basis points to 14.5 per cent, the lowest in five years. This comes on the back of new completions falling by 9.3 per cent Y-o-Y in H1 2026 and net absorption hitting a record high during the same period.

 

“While 2026 represents a strategic pivot year as firms optimise portfolios, the structural growth trajectory remains intact. We are confident India will hit the century milestone in leasing volumes over the next two years, cementing its position as the epicentre of global business transformation,” Dhir said.

 

She added that despite potential near-term disruptions, including cautious decision-making and portfolio right-sizing, a healthy pipeline of institutionally backed quality supply stands ready to support office sector growth.