Property developers ramp up on rentals as demand for offices, malls and data centres soars

Bengaluru-headquartered Prestige Estates leased 1.21 million square feet of offices at 94 percent occupancy during Q1FY26, with its malls posting 99 percent occupancy and accruing Rs 590 crore in gross turnover. The company has projected a pipeline of 5 million square feet of Grade-A offices under construction in Bengaluru and Hyderabad.

DLF has 46 million square feet of commercial space with 94 percent occupancy, and its new assets in Chennai and Gurugram are nearly fully leased, the realtor said. The company’s Vice Chairman Sriram Khattar told investors during a recent interaction, “From the existing portfolio, the rental growth is between 7 percent to 8.5 percent. But we have put in a framework where we want the growth to be in the mid-teens year after year.”

Oberoi Realty’s office portfolio too is performing strongly. Vikas Oberoi, Chairman and Managing Director of Oberoi Realty told investors, “Commerz I and entire Commerz II are for the first-time fully leased, and we are left with only Commerz III and which is in great demand.”

Industry experts attribute the shift towards rentals to growing investor appetite, supportive regulatory changes and developers seeking steady income. Ravi Shankar Singh, Managing Director – Residential Transaction Services, Colliers India sees this model growing further. “With long lease tenures and high occupancy rates, this model is considered sustainable and likely to expand further,” he said, adding that the rise of REITs and demand for commercial spaces have made annuity income far more attractive.

According to Vivek Rathi, National Director – Research, Knight Frank India concurred. “Leading developers such as DLF, Lodha, and Prestige are expanding into commercial real estate such as offices, malls, warehouses, and hospitality assets to reduce reliance on residential sales and secure stable, recurring revenue.” Rathi added that rentals help shield developers from housing market cycles and enhance brand visibility. DLF is now targetting Rs 10,000 crore in rental income over the next few years.

Data centres have emerged as a key contributor to this revenue stream, with Lodha Developers reporting Rs 500 crore in sales from this vertical during the June quarter. Prestige Estates said it has partnered with Japanese telecom major NTT to build a 100 megawatt (MW) data centre campus in Bengaluru. Groups such as Hiranandani, Adani and Reliance too are investing heavily in similar assets.

“Data centres represent long-term leases with an extremely stable tenant base. They are bound to see massive investment interest given the major focus of the government in this AI age,” Rathi said.

With occupancies near full, institutional investment rising and REIT adoption growing, developers and analysts expect annuity-based income to expand further. Colliers’ Ravi Shankar Singh said, “Digital infrastructure like data centres and high-yield commercial spaces are now central to developer strategies. These assets offer stable occupancy and predictable returns, reshaping valuations and providing resilience beyond residential cycles.”