Office properties see record leasing as residential market cool off, says report

The office market recorded its highest-ever quarterly leasing volume at 29.9 million square feet in Q1 2026 across top eight cities, Knight Frank said in a new report . This represents a 6% increase over the previous peak observed in Q1 2025, the consultant said .

What does the Knight Frank report suggest?

The growth in Q12026 was broad-based across markets, Knight Frank said adding in contrast to the base period where demand was heavily skewed towards Bengaluru, MMR at 5.6 million sq ft and Hyderabad at 5.9 million sq ft each recorded historic highs in Q1 2026, compared to four markets achieving similar peaks in the base period.

“To contextualise the scale of activity, leasing volumes in both markets during the quarter exceeded more than half of their total transaction volumes for the entire year of 2025,” it said

GCC’s continued their dominance as the largest end user group leasing 14.4 million sq ft of office space in Q1 2026, it said.

Rents in office properties went up between 2% and 15% YoY across cities.

NCR and Kolkata led the gains at 15% YoY each, while Hyderabad and Chennai recorded increases of 8% YoY. Rent levels in Mumbai and Bengaluru saw comparatively moderate growth of 6% and 7% YoY, respectively. Notably, NCR and Bengaluru breached an average rent of Rs 100 per sq ft for the first time, it said.

On all yardsticks, sales growth, quarters to sell and unsold inventory residential markets are seeing challenges, it said.

Sales of residential units

The sales of residential units went down 4% YoY to 84,827 units from 88,361 units in Q1 2025 across top eight cities. Large volume markets of Mumbai (7%) National Capital Region (NCR) (11%) and Pune (11%) recorded YoY decline in sales,

Market activity remained skewed toward the higher end of the price spectrum, it said, adding volumes continue to slide in ticket sizes below Rs 1 crore categories. Units priced above Rs 1 crore recorded growth of 11% YoY in Q1 2026, even as the sub-Rs 50 lakh and Rs 50 lakh – 1 crore segments contracted by 23% and 12%, respectively.

This growth in higher ticket sizes was primarily led by the Rs 1-2 crore segment, which grew by 10% YoY and accounted for 29% of total sales. Other premium segments also saw strong traction, with sales rising by 17% in the Rs 2- 5 crore segment, 12% in the Rs 10-20 crore segment, and 80% in the Rs 20-50 crore segment, it said.

The quarters to sell (QTS) metric, which estimates absorption time based on the average sales rate of the past eight quarters, has edged upward across the
eight key markets, rising from 5.9 quarters in Q1 2025 to 6.0 quarters in Q1 2026.” While the movement appears marginal in isolation, it reflects the compounding effect of moderating sales and sustained new supply additions,” the consultant said.

Unsold inventory levels have continued to rise since 2020, driven by supply consistently outpacing sales, it said. This increase has been largely concentrated in the over Rs 1 crore segment, reflecting the sustained developer focus on higher ticket size projects in recent years.

Inventory in this segment has grown by 18% YoY, while that in the sub-Rs 5 crore and Rs 5-10 crore segments has declined by 7% and 2% YoY, respectively. Notably, the Rs 2-5 crore category has seen a sharp 46% YoY increase in inventory, warranting closer monitoring from a market balance perspective, it said

Inventory build-up is most pronounced in the Rs 2 crore to Rs 5 crore segment, though this has not translated into any material stress on market balance. With Quarters to Sell (QTS) at a steady 4.4 quarters, inventory in this category remains well supported by underlying demand dynamics, it said.

The luxury and super-luxury segments are currently showing elevated QTS levels, with units above Rs 50 crore at 9.7 quarters and those in the Rs 20-50 crore n range at 14.2 quarters. However, these figures should be interpreted with caution. The absolute size of these segments remains limited, with a combined inventory of under 2,000 units, it said.

The market is showing signs of cooling in overall sales and launches, partly driven by persistently high price levels as developers continue to hold firm on headline pricing.

In response to the resulting moderation in sales, developers are increasingly adopting demand-side measures such as bank and developer subvention schemes, cash discounts and freebies, along with more aggressive channel partner incentives to support transaction volumes, it said

Office market sees record quarterly leasing volume at 29.9 million square feet. A 6% increase over the previous peak seen in Q1 2025. MMR at 5.6 million sq ft and Hyderabad at 5.9 million sq ft each recorded historic highs in Q1 2026. GCCs was the largest end user group leasing 14.4 million sq ft of office space in Q1 2026. Rents in office properties went up between 2% and 15% YoY across cities.