West Asia Conflict Slows Office Supply, Risks Rental Spike: Report Says
Office Completions in Top Indian Cities Slump Amid Iran War
The ongoing Iran war has had a significant impact on the office market in top Indian cities, leading to a decline in office completions and a tightening of supply. This has resulted in rising rental risks, despite strong leasing demand.
According to data from Vestian Research, a real estate consultancy firm, fresh office completions across the top seven cities fell by 36 percent quarter-on-quarter in Q1 2026. The sharpest slowdown was seen in Hyderabad, which witnessed a 95 percent collapse in new completions, from 6 million square feet in the previous quarter to just 0.3 million square feet.
| City | Q1 2026 | Q4 2025 | % Change |
|---|---|---|---|
| Hyderabad | 0.3 million | 6 million | -95% |
| Bengaluru | 2.5 million | 3.8 million | -34% |
| Mumbai | 2.2 million | 2.5 million | -12% |
| NCR | 4.8 million | 4.5 million | 7% |
| Pune | 1.3 million | 1.2 million | 8% |
| Chennai | 1.1 million | 1.2 million | -8% |
| Kolkata | 0.8 million | 0.9 million | -11% |
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The slowdown in new supply is attributed to global uncertainty and supply chain disruptions caused by the war. Despite this, leasing demand from corporates has remained strong, resulting in a 20 percent increase in office absorption. This, in turn, has led to tighter vacancies and further rental pressure.
The data shows that fresh office completions reached their lowest levels in the past four quarters, at 9.7 million square feet in Q1 CY2026, a drop of 36 percent from the previous quarter. This has resulted in a widening gap between supply and demand, pushing pan-India office vacancy down to 9.5 percent from 10.8 percent in the previous quarter.
The pressure on rental rates is likely to intensify, particularly in prime office corridors. Mumbai remains the country's most expensive office market, with rentals averaging Rs 152.6 per square foot a month. Hyderabad, on the other hand, has seen a significant increase in weighted average office rentals, appreciating by 5.3 percent over the previous year, the highest growth among the top seven cities.
| City | Rental Growth (YoY) |
|---|---|
| Hyderabad | 5.3% |
| Mumbai | 4.4% |
| NCR | 3.3% |
| Bengaluru | 2.2% |
| Pune | 1.8% |
| Chennai | 1.5% |
| Kolkata | 1.2% |
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Industry analysts believe that if the West Asia-related disruptions persist, delayed project deliveries could further squeeze Grade A office supply in major business districts, accelerating rental growth over the next few quarters. The latest data suggests that while India's office demand engine remains strong, geopolitical shocks are beginning to constrain supply, shifting the market further in favour of landlords in 2026.
Investor Takeaway
Investors should be cautious of potential rental spikes in the Indian office market due to supply constraints.
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