Commercial office leasing across the top six cities in India is expected to rise 10-11 per cent on year to end at 59-60 million square feet (msf) in FY25 and rise a further 3-4 per cent in FY26, driven by global capability centres and domestic corporates, rating agency ICRA said in a report.
Office vacancies across the top six markets are seen hitting multi-year lows at 14-14.5 per cent by March 2026, despite supply of 125-130 msf coming in during this fiscal and the next. The six cities mentioned in the report are Mumbai, Delhi-NCR, Bengaluru, Chennai, Hyderabad and Pune.
In the first nine months of FY25, leasing activity was at 44 msf, after an absorption of 54 msf in FY24, with increase in physical occupancies and revival in SEZ occupancies following floor-wise denotification. “On an overall basis across top six office markets, the healthy absorption trends are expected to continue in the medium term and occupancies are expected to reach decadal high by March 2026 to 85.5-86 per cent,” said Anupama Reddy, Vice President and Co-Group Head – Corporate Ratings.
Showing resilience
The Indian office market is one of the few globally that has been seeing a lot of resilience and part of this can be attributed to the underlying fundamentals in the economy such as a highly skilled and cost-effective talent pool, a growing economy, and availability of high-quality office spaces at competitive rentals. “The same factors have now come together to create a period of sustained growth, with India at the forefront of global firms’ real estate decisions and strategies,” said Reddy.
The rating agency said the credit profile of the office-focused real estate companies will remain stable, driven by growth in net operating income backed by a rise in occupancy and higher rentals.
It also projected a 7-8 per cent growth in the rental income of retail mall operators in FY25 and 8-9 per cent in FY26 driven by healthy occupancy levels, growth in trading values and rental escalations. New supply of 9-9.5 msf is expected this year and the next and vacancy levels have risen to 21 per cent due to the new supply. Occupancy is seen at 79-80 per cent over the next two years, until the malls become operational.