NEW DELHI: Vacancy rates in India’s Grade A commercial office space are projected to decrease by approximately 50 basis points, landing between 15.5% to 16% by the end of the current fiscal year, as forecasted by Crisil Ratings.
This reduction is anticipated to stem from robust net leasing growth and the completion of ongoing projects. Notably, vacancy rates have consistently dropped by around 50 basis points annually over the past two fiscal years.
Net leasing is expected to rise by 6-7% this fiscal, largely driven by flexible workspace operators responding to increased occupier demand. Additionally, global capability centres are predicted to contribute to this leasing trend, although demand from domestic IT/ITeS and engineering and manufacturing sectors is anticipated to remain moderate.
However, Crisil warns that AI-induced changes in the IT/ITeS sphere may impact hiring and expansion efforts. Geopolitical uncertainties and tariff challenges could also play a role in leasing decisions among global capability centres.
The outlook varies by city. The NCR and Mumbai Metropolitan Region, accounting for about one-third of India’s commercial office inventory, may see a decline in vacancy by roughly 100 basis points due to limited new supply.
Bengaluru, Chennai, and Hyderabad, which collectively represent around half of India’s office stock, are expected to witness a decrease in vacancy by up to 50 basis points, driven by demand from flexible operators and global capability centres.
Pune’s vacancy rate is forecasted to stabilize following a significant rise last fiscal due to substantial new supply.
The report highlights that strong demand and reduced vacancy levels over the last two years have enabled commercial office players to secure advantageous lease terms during renewals.
Contracted rental escalations and sustained low vacancy rates are projected to bolster cash flows for rated commercial office entities. The agency predicts that their median debt service coverage ratio will improve to 1.6 times in the current fiscal from an estimated 1.5 times in FY26.
The median debt-to-EBITDA ratio is expected to enhance to five times this fiscal year from an estimated 5.4 times in FY26.
