Kolkata’s commercial real estate market entered a rare high-growth phase in 2025, as office rents rose at the fastest pace among India’s major cities amid a prolonged shortage of new supply. The sharp escalation highlights how even traditionally low-cost markets are feeling pressure from sustained occupier demand and stalled development pipelines.
Average office rentals in the city increased by about 16 per cent during the year, pushing headline rents close to Rs 50 per square foot. This surge coincided with office leasing activity crossing two million square feet an annual absorption level Kolkata had not reached in nearly a decade. With minimal new stock entering the market, vacancy levels tightened, allowing landlords to reprice assets more aggressively. Despite the steep percentage growth, Kolkata continues to remain one of the most affordable office markets in the country in absolute terms. Analysts note that the city’s low base amplifies year-on-year changes, yet the current cycle reflects a genuine imbalance between demand and supply rather than speculative pricing. A defining feature of Kolkata’s office market in 2025 was the composition of demand. Unlike Bengaluru, Hyderabad or Pune where global capability centres dominate leasing Kolkata’s absorption was largely driven by domestic enterprises and flexible workspace operators. These occupiers have expanded steadily, supported by cost sensitivity, regional operations and growing demand for managed offices among small and mid-sized firms. Urban economists suggest this trend has important implications for employment geography. Localised office demand supports decentralised job creation, reduces long-distance commuting and strengthens neighbourhood-level economic activity. However, it also places pressure on ageing commercial districts that were not designed for modern energy efficiency or flexible work formats.
Nationally, India’s office market recorded a strong year, with gross leasing across major cities touching new highs and surpassing pre-pandemic levels. Bengaluru alone accounted for nearly one-third of total absorption, underlining the uneven distribution of institutional office development. Against this backdrop, Kolkata’s limited new completions stand out. The city contributed virtually no fresh Grade-A supply in 2025, a gap that is now visible in rent escalation. Urban planners argue that this supply stagnation reflects structural issues, including land assembly challenges, slower approval processes and limited large-format commercial zoning. Without timely intervention, rising rents could erode Kolkata’s long-held cost advantage and constrain future occupier expansion. From a sustainability perspective, the absence of new development also delays the introduction of energy-efficient, low-carbon office buildings that are increasingly standard in other metros. Retrofitting older stock can help, but experts caution that it cannot fully substitute for purpose-built, climate-resilient commercial infrastructure.
Looking ahead, market watchers expect rental growth to moderate if new projects are unlocked over the next two to three years. For Kolkata, the challenge is not demand creation but supply readiness ensuring that future office development aligns with modern workplace needs, environmental performance standards and inclusive urban growth objectives.
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