Record office leasing, rising vacancy: read net, not gross

Three consultants, one quarter, three numbers

The Q3 2026 headline is "record". CBRE puts July–September absorption at about 21.0 msf, up 6% YoY, and January–September at 66.4 msf, the highest for any nine-month period (1). Cushman & Wakefield reports gross leasing of 21.9 MSF across eight cities (2). Colliers reports 18.7 msf across seven, up 9% YoY (3). The spread is mostly definition: Colliers excludes renewals, pre-commitments and LOI-only transactions (3). Capital that prices off the largest number is pricing off the loosest definition.

The more useful figure is net absorption, space newly occupied less space vacated. In this set only C&W publishes it: 14.1 MSF in Q3, up 26% QoQ (2).

Supply is the story nobody headlines

• New completions, Q3 2026: 22.7 MSF, an all-time quarterly high (C&W) (2); about 19.0 msf, up 26% YoY (CBRE) (1); over 19 msf, up 79% QoQ (Colliers) (4).
• Net absorption vs completions (C&W): 14.1 ÷ 22.7 = implied 0.62x cover (2).
• Vacancy: 14.37%, up 63 bps QoQ (C&W) (2); about 16%, up QoQ but slightly below Q3 2025 (Colliers) (4).
• 9M 2026 supply: 51.0 msf, up 18% YoY (CBRE) (1); 43.3 MSF (C&W) (2); 41.7 msf (Colliers) (4).
• Rents: up about 2% QoQ in most major markets (C&W) (2); top-seven average up 7% YoY (Colliers) (4).

Rents are still rising while vacancy rises. That combination holds while new buildings are pre-let or lease quickly. It breaks when speculative completions sit empty for a second and third quarter, and landlords start paying for occupancy through rent-free periods and fit-out contributions that never show up in quoted rents.

Where the supply landed

• Hyderabad: 38% of C&W Q3 completions (implied about 8.6 MSF) against net absorption of 4.1 MSF (2). On Colliers' numbers, 6.7 msf of Q3 supply against 2.2 msf of gross leasing, an implied 3.0x (3)(4).
• Bengaluru: 43% of C&W Q3 completions (implied about 9.8 MSF) against net absorption of 4.02 MSF (2); 14.1 msf of supply in the first nine months (Colliers) (4).
• Delhi NCR: about 0.9 MSF of new supply; vacancy 17.6%, down 220 bps YoY; stock-weighted quoted rent ₹96 per sq ft per month, up 6–9% YoY; Cyber City Grade A at ₹150 (5).
• Mumbai, Pune, Chennai: Q3 gross leasing down 20%, 14% and 23% YoY respectively (Colliers) (3).

CBRE says Hyderabad, Bengaluru and Pune took about 89% of Q3 additions (1). Two southern markets are digesting a supply wave. NCR is consuming existing stock with almost nothing arriving. Those are opposite trades, and a pan-India number averages them into noise.

Who is actually leasing

• GCCs: about 41% of Q3 take-up, roughly 8.7 msf (CBRE) (1); 9.1 MSF, 42% of gross leasing (C&W) (2).
• Flex operators: 24% of Q3 leasing (CBRE) (1). Colliers puts nine-month flex leasing at 12.6 msf, up 37% YoY, while conventional leasing at 41.8 msf was roughly flat (4).
• BFSI: 22% of Q3 leasing (CBRE) (1).

The Colliers split is the uncomfortable one. Working back from its growth rates, an implied ~3.4 msf of the ~3.6 msf year-on-year increase in nine-month leasing came from flex (4). Flex is intermediated demand: an operator signs a long lease and sells short tenure. It is real rent today, but its credit is the operator's balance sheet and seat occupancy, not an end occupier's covenant. GCC demand is the durable layer; flex is the cyclical one.

What this means for capital

1. Underwrite city-level net absorption against city-level completions, not pan-India gross leasing. In Hyderabad and Bengaluru the 2027 rent case depends on Q3's completions leasing within two to three quarters; carry a flat-rent, higher-incentive downside.
2. NCR is the reverse trade. Falling vacancy, thin supply and rising rents (5) support leased Grade A income in Gurugram's core micro-markets, but competition for that stock compresses entry yields. The edge sits in assets with near-term rollovers below current ₹130–150 core rents, not in fully reversioned buildings.
3. Haircut flex-heavy rent rolls. Treat operator leases as a separate credit with a shorter effective WALE, and get operator-level occupancy before paying a conventional-tenant multiple.
4. In the southern markets, prefer pre-let and build-to-suit development over speculative supply until the vacancy trend turns.

Limits of this note

Consultant figures use different city sets (seven or eight), definitions (gross or net, pre-commitments in or out) and submarket boundaries; they are not additive. On NCR they disagree on direction: Colliers has Q3 leasing more than doubling YoY (3), while C&W has gross leasing down 31% YoY (5). Implied ratios are AIS arithmetic on published figures. The data does not show asset-level vacancy, effective (net-of-incentive) rents or transaction yields. This note is not investment advice.

Disclosure: AIS accepts commercial office and income-asset mandates and may benefit from interest in this segment.