NEW DELHI: According to ICRA, a rating agency, vacancy rates in India’s commercial office market are set to drop to multi-year lows by FY2027 due to leasing demand significantly surpassing new supply for the third consecutive year.
Net absorption across the six major office markets—Bengaluru, Chennai, Delhi NCR, Hyderabad, Mumbai Metropolitan Region (MMR), and Pune—is expected to reach an unprecedented 69–70 million sq ft in FY2026. The strong leasing momentum should continue in FY2027, with net absorption projected at over 65 million sq ft.
With demand consistently outpacing supply, vacancy rates are forecast to decline to between 12.5% and 13% by March 2026 and further to 12% to 12.5% by March 2027. These figures represent some of the lowest levels in the sector’s recent history.
In FY2025, net absorption was around 66 million sq ft, a 15% year-over-year increase, and surpassed new supply of about 58 million sq ft. This trend has continued into the current fiscal year, with the first half of FY2026 reporting net absorption of 36 million sq ft compared to new supply of 30.6 million sq ft.
This has led to a gradual reduction in vacancy levels, which dropped to approximately 14% in March 2025 from 15.6% a year prior, further declining to roughly 13% by September 2025.
ICRA attributes this positive leasing momentum to ongoing demand from global capability centers (GCCs), flex space operators, and the banking, financial services, and insurance (BFSI) sector. GCCs are projected to lease 50–55 million sq ft between April 2025 and March 2027, representing close to 40% of the incremental office demand during that time.
During FY2024 and FY2025, GCCs accounted for approximately 35–37% of total net absorption, highlighting their increasing significance as a structural driver of office demand. Several state governments are also introducing policy incentives such as subsidies, skill development support, and infrastructure enhancements to lure further GCC investments.
In terms of city-specific trends, Bengaluru is expected to remain the most robust market, with vacancy rates projected to decline from 9.2% in September 2025 to around 7.5% to 8% by March 2027. Chennai may see its vacancy tighten further to about 5.5% to 6%, supported by limited new supply.
Delhi NCR, currently experiencing the highest vacancy among the top six cities, is expected to improve as well, with rates dropping from about 21% to 19.5% to 20% over the same period. Hyderabad and Pune are anticipated to maintain stable vacancy levels, while MMR may experience further tightening due to sustained absorption.
ICRA expects that the combination of declining vacancies, enhanced debt protection metrics, and supportive policies will keep the office sector appealing to both domestic and global investors in the medium term. Despite global economic and geopolitical uncertainties, ICRA anticipates India’s commercial office leasing activity will remain resilient through FY2026 and FY2027.
