The city recorded office transactions totalling 1.5 million sq ft during January-September 2026, marking the second-highest nine-month leasing volume since 2017
Kolkata: The city’s office market is showing signs of a sustained recovery, with leasing activity rising 27% year-on-year in the third quarter of 2026, driven by steady demand from IT services firms, domestic businesses, flexible workspace operators and manufacturing companies. The improvement, coupled with limited fresh supply, has pushed vacancy rates to their lowest level since 2018 and rents to their fastest growth among India’s eight major office markets, according to Knight Frank India. The city recorded office transactions totalling 1.5 million sq ft during January-September 2026, marking the second-highest nine-month leasing volume since 2017. the market gathered momentum as the year progressed Although the figure was 9% lower than the 1.64 million sq ft recorded during the corresponding period last year. Quarterly leasing rose from 0.37 million sq ft in Q1 to 0.46 million sq ft in Q2 and 0.67 million sq ft in Q3, indicating a steady improvement in occupier sentiment. New office completions stood at just 0.28 million sq ft during the first nine months of 2026, following a year in which no new supply was added. The city’s office vacancy rate fell to 26.1% in Q3 2026 from 31.9% a year earlier, a decline of 582 basis points. The rate was also substantially lower than the 43.5% recorded in Q3 2021, pointing to a gradual tightening of the market after years of elevated vacancies. Average transacted rents rose 13% year-on-year to Rs 52 per sq ft per month in Q3 2026, up from Rs 46 a year earlier. Rentals were also 37% higher than in Q3 2019, reflecting the combined impact of improving occupancy, sustained demand and limited availability of quality office space. Grade A properties accounted for 94% of transactions during the first nine months of 2026, underlining occupiers’ growing preference for efficient, professionally managed and non-strata office spaces. An industry-wise analysis showed that IT and IT-enabled services (ITeS) accounted for 47% of office transactions, followed by flexible workspace operators at 27%. Manufacturing, however, emerged as the fastest-growing segment, with leasing surging 256% year-on-year to 0.23 million sq ft. Its share of total transactions rose to 15% during the first nine months of 2026, from just 5% in the corresponding period last year. Rents have risen at the fastest pace among India’s major office markets, even as vacancy has declined to its lowest level since 2018. Sanjay Jain, managing director of Siddha Group, said a more positive perception of Bengal, backed by a conducive business environment, could help Kolkata retain talent, attract fresh investment and sustain annual office market growth of 30–50% in the coming years.
This trend has been due to the increasing number of start-up owners,” he added.
Joydeep Paul, senior director (occupier strategy and solutions and industrial & logistics) and Kolkata branch head at Knight Frank India, said the market was witnessing steady occupancy trends, supported by limited new supply and stronger leasing through the year. Saket Mohta, managing director of Merlin Group, said the increasing preference for Grade A offices had further strengthened the market. Ravindra Chamaria, chairman and managing director of Infinity Group, which has been among the pioneers of IT office space development in Kolkata, said the IT and ITeS market was buoyant, with quality office space becoming increasingly difficult to find. Rameswar Prasad, director of Prasad Group, said the growth in office space demand, despite the market being affected by global macroeconomic turmoil, had renewed optimism among real estate developers in Bengal.
The recovery has been particularly significant against the backdrop of limited fresh supply. This has helped absorb available inventory and improve occupancy levels. The improvement in occupancy has translated into stronger rentals. The increase was the highest among the country’s eight major office markets. The preference for better-quality office assets has emerged as another defining feature of the market. “IT services, India-facing businesses and flex operators remain important sources of demand, while manufacturing has gained ground. Together, these trends reflect a market in which occupier demand and the availability of quality non – strata space is increasingly important to pricing,” he added. Real estate developers are also reporting the impact of the shift towards higher-quality office spaces, with rising demand offering fresh impetus to commercial projects. “It seems that in the coming three years there will be hardly any stock in the pipeline. Even several IT companies that had been on the brink of exit from the state have also begun expanding their operations now,” he added. Beyond large corporate occupiers, demand from smaller businesses and start-ups is also contributing to the market’s recovery. “There is a noticeable rise in demand for small offices with a consequent rise in rental.
Last year many new companies came to Kolkata, shooting up demand for commercial space.
Third-party IT services companies remained Kolkata’s largest occupier group, leasing 0.57 million sq ft and accounting for 38% of total transactions during January-September. India-facing businesses followed with 0.47 million sq ft, or 31% of leasing activity, while flexible workspace operators leased 0.41 million sq ft, accounting for 27%. Global capability centres contributed a smaller share of 3%, with transactions totalling 0.05 million sq ft. Flexible workspace operators, too, have strengthened their presence, increasing their share of leasing from 24% in January-September 2025 to 27% in the corresponding period this year. Harshavardhan Neotia, chairman of Ambuja Neotia Group, described the 27% rise in office leasing as an encouraging indicator of the city’s economic prospects. Suhel Saraf, managing director of Sugam Group, also pointed to the changing composition of demand, noting that manufacturing’s share of leasing had tripled to 15%.
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