Delhi-NCR’s commercial real estate market records broad-based leasing recovery

Market Resilience and Economic Foundations

The real estate landscape across Delhi and the National Capital Region (NCR) demonstrated remarkable resilience during the first quarter of 2026, underpinned by a stable macroeconomic environment. 

National economic indicators remained encouraging, with GDP growth reaching 7.80% in the third quarter of the 2025-26 financial year. This performance was further supported by a moderate Consumer Price Index (CPI) inflation rate of 3.21%, creating a favourable environment for institutional investment and corporate expansion.

Within the industrial sector, the Manufacturing Purchasing Managers’ Index (PMI) stood at 53.9 in March 2026, while the Index of Industrial Production (IIP) reached 159.0 in February - reflecting sustained economic activity, which has directly translated into stronger demand for physical space across the commercial, retail, and logistics sectors. 

The region continues to attract significant interest from both domestic and multinational occupiers, supported by the NCR’s extensive talent pool and robust infrastructure ecosystem.

The quarter’s performance not only reflects historical momentum, but also signals growing occupier confidence. Consumer spending growth remained steady at 8.70%, ensuring that the underlying drivers of the retail and warehousing sectors continue to strengthen. 

As the market moves into the second quarter, the region appears well-positioned to maintain its status as one of India’s primary hubs for economic activity, with demand and supply dynamics remaining broadly balanced across most micro-markets.

The Evolution of the Office Demand

The commercial office sector in Delhi-NCR witnessed a significant surge in activity during the first quarter of 2026, with gross leasing volume reaching 2.8 million square feet - representing a substantial 36% increase compared with the previous quarter and a strong return to large-scale workspace commitments. 

Demand was led by flexible workspace operators, which accounted for 27% of total quarterly uptake, standing 82% above the average recorded since 2025. This trend was complemented by steady contributions from the engineering and manufacturing sectors at 21%, alongside Information Technology and Business Process Management (IT-BPM) firms at 20%.

Geographically, Gurugram remained the primary destination for office occupiers, accounting for 60% of total leasing volume, while Noida continued its steady rise with a 37% share. Among these hubs, the Noida Expressway emerged as the most active micro-market, particularly in terms of fresh space absorption, followed by Udyog Vihar and the NH-8 Prime corridor. 

Sustained leasing momentum over the past year has also contributed to a compression in the headline vacancy rate to 19%, representing a decline of 240 basis points year-on-year.

A particularly notable development was the strong expansion of global capability centres (GCCs), which recorded 0.9 million square feet of leasing activity, marking an almost threefold increase on an annual basis. This growth has been driven by multinational corporations leveraging the region’s infrastructure and talent pool to establish strategic operations. 

As demand continued to match or exceed new supply, which totalled 1.8 million square feet during the quarter, rental values recorded a moderate uptick across the region. Overall rents rose by up to 5% quarter-on-quarter - with prime locations such as the Gurugram Central Business District outperforming the broader market, achieving annual growth of as much as 15%.

The Changing Face of Modern Retail

The retail landscape across Delhi-NCR experienced a period of significant revitalisation during the first quarter of 2026, with total leasing activity reaching 0.6 million square feet. 

Although this represented a sequential moderation compared with the previous quarter, it reflected a robust 45% rise year-on-year.

A clear preference for organised retail environments also emerged, with shopping malls capturing 64% of quarterly leasing activity, while traditional high streets accounted for the remaining 36%.

Gurugram further strengthened its position as the region’s leading retail destination, accounting for 54% of total leasing volume, followed by Delhi at 26% and Noida at 20%. 

Within the mall segment, leasing volumes stood 48% above the average recorded throughout 2025, driven primarily by the absorption of supply delivered in the final quarter of the previous year. 

The fashion segment remained the primary growth driver, accounting for 32% of total space take-up and recording a 75% year-on-year increase in leasing activity, followed by healthy demand from the entertainment and department store categories, which represented 16% and 14% of total leasing activity, respectively. 

Meanwhile, the food and beverage segment experienced a notable shift towards high street locations, where leasing activity expanded by 1.3 times compared with the previous year, as operators sought quality alternatives to the limited availability within prime malls.

The absence of new developments during the quarter contributed to a further tightening of available inventory, pushing the headline mall vacancy rate down to 7.9%. This shortage of space has become particularly pronounced within Grade-A+ assets, where vacancy levels remained constrained at approximately 1%. 

As a result, rental values across prime high street locations continued to trend upwards. While quarter-on-quarter growth remained limited, annual rental increases were significant across several micro-markets, with Lajpat Nagar and Punjabi Bagh recording the sharpest rises at 13% and 10%, respectively. 

Other established retail destinations, including Khan Market and Galleria Market in Gurugram, also reported annual rental growth of 8% and 6%, further reinforcing sustained demand for premium retail positioning across the capital region.

Logistics and Industrial as the Region’s Engine

The industrial and warehousing sector continued to serve as a key growth engine during the first quarter of 2026, recording gross absorption of 3.1 million square feet. This level of activity was accompanied by a substantial influx of new supply, which totalled 3.3 million square feet, reflecting the ongoing expansion of the region’s logistics footprint. 

Demand for high-quality Grade-A facilities remained heavily concentrated within the Luhari and Farukh Nagar micro-markets, which together accounted for nearly half of total leasing activity during the quarter.

The composition of demand further highlights the critical role of third-party logistics and digital commerce within modern supply chains, with third-party logistics (3PL) and e-commerce occupiers collectively accounting for approximately 65% of total space absorption. 

Within this mix, 3PL operators led demand with a 35% share, followed by e-commerce at 29% and the automobile sector at 19%. Several major transactions reinforced this trend, with large-scale deals exceeding 100,000 square feet representing 65% of total leasing volume during the quarter.

Despite healthy leasing momentum, the significant volume of new completions contributed to a noticeable rise in vacancy levels, which rose by 550 basis points year-on-year to 22.2% - primarily driven by supply continuing to outpace demand in recent periods. 

Nevertheless, rental values across the region remained resilient and, in several cases, recorded strong growth. 

Micro-markets such as Faridabad-Palwal registered an impressive 20% annual increase in rents, while Ghaziabad recorded growth of 10.6%, highlighting continued demand for premium, strategically located industrial assets within a highly competitive market.

Strategic Projections for H2 2026

The strategic outlook for Delhi-NCR across its diverse real estate asset classes remains broadly positive for the remainder of 2026, characterised by a narrative of steady expansion and sectoral refinement. 

In the office segment, the market anticipates sustained momentum, with both net absorption and new supply projected to rise, supporting a further compression in vacancy rates as occupiers continue to prioritise high-specification Grade-A environments.

Consequently, rental values are forecast to maintain an upward trajectory, with prime corridors likely to outperform the broader market average as corporate demand for strategic workspace remains firm.  

Within the retail landscape, the absence of immediate supply additions is expected to drive further market consolidation, with mall vacancy rates continuing to decline as leasing activity in recently completed projects gains momentum.

The tightening of available space is likely to support continued rental growth across both institutionally managed shopping centres and prominent high street locations, as strong consumer spending sustains competition for prime retail positioning throughout the remainder of the year.

The industrial and warehousing segment is also poised for continued growth, with both demand and new supply expected to rise in the coming quarters. 

While sustained leasing activity may contribute to higher vacancy levels amid accelerating supply additions, rental values are anticipated to remain stable across the region’s primary logistical hubs. 

The ongoing infrastructure developments and the strategic importance of the region as a national distribution node ensure that the long-term fundamentals of the region’s property market remain secure, providing a stable platform for institutional investors and corporate occupiers alike. 

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