Supply Catches Demand: The Office Market's First Vacancy Rise in Three Years

Record Completions & Diverging Supply Estimates

Our previous piece described record demand. This one looks at the other side: how much space was built. According to Cushman & Wakefield's Q3 2026 page, completions in the top eight cities were 22.7 million square feet, a quarterly record that nearly doubled on the previous quarter. Bengaluru accounted for 43% and Hyderabad for 38%. Year-to-date completions were 43.3 million square feet.

CBRE's figures differ: about 19.0 million square feet of completions in Q3, up 26% on the year but down on the quarter, and about 51.0 million square feet for nine months, a record and up 18%. Hyderabad, Bengaluru and Pune accounted for about 89% of CBRE's Q3 additions. The two firms disagree by several million square feet in the quarter and by about 8 million in the year to date. We report both. Differences in definition (for example, when a building counts as complete), in city coverage and in rounding can explain gaps of this size, but our sources do not say which applies.

First Vacancy Uptick in 12 Quarters & Construction Lags

Vacancy: Cushman & Wakefield reported pan-India vacancy of 14.37%, up 63 basis points from the previous quarter, which it described as the first increase after twelve quarters of decline. Rents rose 2% on the quarter. CBRE's page did not give vacancy or rents, so we cannot compare. A rise of 63 basis points is modest, but a trend that reverses after three years is worth noting.

Why supply can outrun demand temporarily: Office buildings take years to build. Projects launched during the strong leasing years of the past few quarters complete around now. When completions bunch, vacancy rises even if demand is strong, because new space takes time to lease. Whether the rise continues depends on how much of the new space is pre-leased and how quickly the rest finds tenants. Cushman & Wakefield said pre-commitments were about 12% of year-to-date activity, which suggests most new space is leased after completion.

“A national average hides the premium building that is full and the older one that is not.”

The Flight to Green-Certified Assets & Geographical Concentration

CBRE reported that green-certified assets made up 80% of new completions and 82% of Q3 leasing. That points to occupier preference for certified buildings, which has consequences for older, uncertified stock. We do not have data on rents or vacancy by building grade in our sources, so we cannot say how large the gap is.

Where the risk sits: Supply is concentrated. Cushman & Wakefield put 81% of Q3 completions in two cities, and CBRE put 89% in three. In markets where supply and GCC demand are both concentrated, an adjustment in either will be felt strongly. In cities with less new supply, such as Chennai or Kolkata, the picture may be different, though our sources do not give city vacancy.

Guide to Reading Commercial Vacancy Data

How to read vacancy: our guide: 1. Look at direction and level. 14.37% is a level; a rise after twelve quarters of decline is a direction. 2. Split by grade and micro-market. A national average conceals premium buildings that are full and older buildings that are not. 3. Check pre-leasing. High pre-leasing means supply is less risky. 4. Watch rents. Rents rose 2% on the quarter. If vacancy keeps rising, rent growth may slow. 5. Be careful with forecasts. Both firms are describing one quarter.

Tenant Opportunities, Landlord Risks & Forward Outlook

What it means for tenants: Tenants gain choice and, in time, negotiating power where supply is abundant. Premium, certified buildings in prime locations may stay tight. A tenant planning a lease should compare several buildings and ask about incentives such as rent-free periods and fit-out contributions.

What it means for landlords and lenders: Landlords with new buildings face leasing-up risk. Lenders should look at pre-leasing and tenant quality. This is general information, not investment advice.

What it means for the wider economy: Offices employ and attract spending. A healthy office market supports services employment, but the dependence on a small number of cities is a vulnerability for balanced regional growth.

What we do not know: We do not have vacancy by city, rent levels, or the proportion of 22.7 million square feet that was pre-leased. We also do not know how CBRE would have measured vacancy.

A comparison worth making: Readers can set the two stories side by side. On one hand, record leasing and record completions in the same quarter; on the other, rising vacancy. They are consistent: demand is high, and supply has risen faster than the market could absorb in that single quarter. The next two or three quarters will show whether the vacancy rise is a blip or a turn.