India's office leasing record pace poised to continue in FY26

India’s commercial office market recorded a landmark year in FY25, with net office space absorption reaching an all-time high of 65 million sq. ft. across the top six cities, like Bengaluru, Chennai, Delhi National Capital Region (NCR), Hyderabad, Mumbai Metropolitan Region (MMR), and Pune. This reflects a 14% YoY growth and surpassed the annual supply of 58 million sq. ft., indicating strong demand. Investment Information and Credit Rating Agency (ICRA) attributes this momentum to increased leasing by Global Capability Centers (GCCs), Banking, Financial Services and Insurance (BFSI) institutions, flexible workspace operators, and domestic Information Technology-Business Process Management (IT-BPM) firms. The trend continued into Q1 FY26, with 17 million sq. ft. of net absorption, closely matching the 17.7 million sq. ft. of new supply. Vacancy levels are expected to fall further to 13-13.5% by March 2026, compared to 13.9% in March 2025 and 15.5% in March 2024, reflecting strong market fundamentals.
ICRA has observed a shift in leasing trends, where a slowdown in global Information Technology (IT) firm activity is being offset by increased demand from GCCs and BFSI sectors. As of June end, total Grade A office stock across these six cities stood at 1,030 million sq. ft., with Bengaluru accounting for the highest share at 26%, followed by Delhi-NCR and MMR. Vacancy rates are expected to decline in Bengaluru (9–9.5%), MMR, and Pune, while Chennai is likely to remain stable at 9–9.5%. Delhi-NCR and Hyderabad are also projected to see steady or slightly improving vacancy levels. The financial outlook for office space developers is positive, with debt-to-Net Operating Income (NOI) expected to improve to 5x-5.5x by March 2026 from 6x in FY25. Debt service coverage ratio (DSCR) is also projected to rise to 1.35x-1.4x in FY26 from 1.3x in FY25, supported by higher rentals, improved NOI, and lower interest costs.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.