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Commercial office leasing in India's six major cities is anticipated to grow by 10-11% in FY25, reaching 59-60 million square feet, with a further 3-4% rise in FY26, according to ICRA. Driven by demand from Global Capability Centres (GCCs) and domestic corporations, this trend is underpinned by India's skilled talent pool and competitive office rental rates. Vacancy rates are expected to drop to multi-year lows despite substantial new supply. Additionally, retail mall operators are forecasted to experience a rental income increase of 7-8% in FY25 and 8-9% in FY26, reflecting robust occupancy levels and rising trading values.
Commercial office leasing across India's top six cities is projected to grow by 10-11% in FY25, reaching approximately 59-60 million square feet (msf), and by an additional 3-4% in FY26, according to a recent report by rating agency ICRA. This growth is attributed to the increasing demand from Global Capability Centres (GCCs) and domestic corporations. Advertisement
Office vacancies in Mumbai, Delhi-NCR, Bengaluru, Chennai, Hyderabad, and Pune are predicted to decline to multi-year lows of around 14-14.5% by March 2026, even with a significant supply of 125-130 msf expected this fiscal year and the next. During the first nine months of FY25, leasing activity reached 44 msf following an absorption of 54 msf in FY24, supported by increased physical occupancy and a revival in SEZ occupancy due to floor-wise de-notification.
ICRA emphasised the resilience of the Indian office market, attributing its strong performance to factors such as a skilled and cost-effective talent pool, economic growth, and competitive rental rates. Anupama Reddy, Vice President and Co-Group Head of Corporate Ratings at ICRA, noted that overall occupancies are expected to rise to decadal highs of 85.5-86% by March 2026.
The credit profiles of office-focused real estate firms are expected to remain stable due to higher net operating incomes driven by rising occupancies and increased rental rates. Meanwhile, retail mall operators are forecasted to achieve 7-8% rental income growth in FY25 and 8-9% in FY26, owing to healthy occupancy levels, trading value growth, and rental escalations. However, with new supply of 9-9.5 msf, retail mall vacancy levels have risen to 21%, though occupancies are expected to stabilise at 79-80% over the next two years as these malls become operational.
In a separate statement, Peush Jain, Managing Director of Commercial Leasing and Advisory at Anarock Group, expressed optimism about the office sector's future, predicting supply to exceed a billion square feet by 2025, driven by strong leasing activity led by GCCs and flexible workspace operators.
The sector's stability is supported by India's economic fundamentals, skilled workforce, and competitive rental rates, positioning it as a preferred destination for global and domestic corporations. With promising leasing activity and stabilising vacancy rates, the outlook for India's real estate sector remains optimistic.
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