Vacancy at an 18-month low despite 46 million square feet of new supply, GCCs accounting for 38% of all leasing, and rentals rising in every major city
The narrative around India’s commercial office market has been one of cautious optimism for the last several quarters — strong demand from global companies setting up capability centres, offset by concerns about IT sector hiring and a wall of new supply coming to market. The Q1FY27 data, analysed by JM Financial using Cushman and Wakefield research, tilts the balance toward the optimists. Vacancy across the top seven cities has edged down to 13.1% — an 18-month low — despite nearly 46 million square feet of fresh office supply entering the market over the last four quarters. Rentals are rising in every single major market. And Global Capability Centres are leasing at a pace that is 38% higher year-on-year. In office REITs, JM Financial names Embassy REIT as its top pick. In flex workspaces, WeWork India is the preferred name.
The Vacancy Story
The most important single data point in JM Financial’s sector update is the vacancy trajectory. At 13.1% in Q1FY27 — down from 13.2% in Q4FY26 and 14.9% in Q1FY26 — overall vacancy has improved 180 basis points year-on-year despite a meaningful wave of new completions. Net absorption of 11.1 million square feet in the quarter broadly matched new supply delivered, meaning the market absorbed what was built without letting vacancy rise. On a trailing twelve-month basis, net absorption stood at a healthy 53.8 million square feet.
The city-level picture is nuanced and worth understanding in detail. Bengaluru and Mumbai remain the tightest markets in the country at 8.6% and 8.9% vacancy respectively — levels that, in any other commercial real estate market globally, would be described as extremely tight. Kolkata has had one of the most dramatic improvements, with vacancy falling from 28.6% in Q1FY24 to 10.6% today on stable office inventory and steady leasing. Hyderabad has seen a 380 basis point year-on-year improvement to 19.1%, driven by the absence of new completions in recent quarters following heavy supply earlier in FY26.
The two markets where vacancy edged up — Bengaluru and Pune — did so for understandable reasons. In Bengaluru, record supply additions exceeded absorption during the quarter. In Pune, fresh completions broadly matched net absorption. Neither represents a demand problem — both reflect the timing of supply delivery against a backdrop of healthy occupier interest.
The Rental Signal
Rental appreciation in every single major office market during Q1FY27 is the data point that deserves the most attention — and gets the least. “All seven major office markets reported YoY rental growth,” JM Financial’s report notes, “highlighting continued pricing power across landlords.” The significance of this is amplified by the Bengaluru situation: rents rose even in a market where vacancy increased due to new supply. That is a market where occupier demand is strong enough to support pricing even as supply grows — a fundamentally healthy demand environment.
This rental resilience matters enormously for listed office REITs and landlords, because it suggests that the revenue per square foot being underwritten at today’s lease rates will prove conservative rather than optimistic as contracts renew over the coming years.
GCCs — The Demand Engine
The structural driver behind India’s office market strength is the Global Capability Centre buildout — and the numbers are striking. GCCs accounted for 38% of total leasing activity in the first half of calendar year 2026, having leased approximately 16.5 million square feet. This represented a robust 38% year-on-year increase in GCC leasing activity. “GCCs are still the principal growth engine of India’s office market,” the report states — and there is no visible sign of this demand moderating.
GCCs are the offshore technology, analytics, finance and operations arms of global multinationals — and India’s combination of English-speaking talent, competitive costs and improving infrastructure has made it the global default destination for this kind of capacity buildout. Unlike pure IT services demand, which is subject to client discretionary spending cycles, GCC demand is driven by structural cost arbitrage and talent availability — factors that are more durable across economic cycles.
Flex — The Cast
Flex workspace operators contributed approximately 25% of leasing activity during Q1FY27 — a meaningful share that reflects the maturation of the flex model in India from a niche offering to a mainstream occupier choice. Activity was concentrated in core micro-markets, “as operators favoured high-visibility locations” — a signal that the premium end of the flex market is performing better than the commodity end.
The sectoral demand mix varies significantly by city and tells its own story about each market’s economic character. Bengaluru is led by engineering and manufacturing. Mumbai’s leasing is dominated by BFSI. Delhi NCR’s demand comes from IT-BPM, flex operators and professional services in roughly equal measure. Pune’s leasing is majority flex. This diversity of demand sources across markets is itself a stabilising factor — India’s office market is not dependent on a single sector’s hiring cycle.
Embassy REIT and WeWork
In listed office space, JM Financial’s top pick is Embassy REIT — India’s largest and most liquid office REIT, with a strong development pipeline of 6.2 million square feet over FY27-29. “Embassy REIT is well positioned to gain from the uptick in leasing demand given its strong development pipeline,” the report states — a pipeline that converts the improving demand environment directly into incremental rent-generating assets over the next three years.
In workspaces, WeWork India is the preferred pick — not the global WeWork entity that faced well-documented financial difficulties, but the Indian franchise which operates independently with a net-cash balance sheet. “WeWork remains best placed to capture demand due to its premium positioning, superior brand recall and a net-cash balance sheet,” JM Financial notes. The locked-in revenue at the start of FY27, combined with 14,000 new seats expected to come onstream in Q1FY27 and contributions from other revenue streams, provides 20-25% growth visibility for the full year.