Vacancy levels at historic lows, expected to decline further by 2026

New Delhi [India] August 7 : Vacancy levels, already at historic lows, are expected to decline even further, according to a recent report by rating agency ICRA. From 15.5 per cent in March 2024, vacancy dropped to 13.9 per cent in March 2025 and is projected to fall to 13.0-13.5 per cent by March 2026, reflecting strong fundamentals and consistent demand.

"The net absorption stood at record-high levels of 65 million square feet (msf) in FY2025," said Abhishek Lahoti, assistant vice president and sector head, corporate ratings, ICRA. "The slowdown in leasing from global IT firms has been compensated handsomely by the GCCs and the BFSI segments, which ICRA expects will continue to dominate leasing activity."

India's commercial office market is set to remain resilient in FY2026, with demand expected to stay at record-high levels seen in the previous year. The top six citiesBengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai Metropolitan Region (MMR), and Puneare projected to see robust leasing activity, primarily driven by Global Capability Centres (GCCs), BFSI institutions, flex-space operators, and domestic IT-BPM firms.

In FY2025, net absorption across these key markets touched 65 msf, marking a 14 per cent year-on-year increase and surpassing the supply of 58 msf. The momentum appears to be holding steady in the first quarter of FY2026 as well, with 17 msf already absorbed, nearly on par with the 17.7 msf of new supply.

As of June 30, 2025, the total Grade A office stock across the six cities stood at approximately 1,030 msf. Bengaluru leads the pack with the highest share at 26 per cent, followed by Delhi-NCR and MMR. City-level vacancy projections also point to a steady outlook. Bengaluru is set to see a dip from 9.8 per cent to 9.0-9.5 per cent with 16.5 msf of new supply, while Chennai is expected to maintain a stable vacancy at 9.0-9.5 per cent. Delhi-NCR and Hyderabad are projected to ease slightly, while MMR and Pune also anticipate a decline, signaling consistent net absorption.

On the financial front, ICRA expects the credit profile of major office space developers to remain stable. "The leverage metrics of the players as measured by debt/NOI is expected to improve to 5.0x-5.5x as of March 2026, from 6.0x in FY2025," Lahoti added. Improved rental income and a favourable interest rate environment are also expected to push debt service coverage ratios to a healthy 1.35x-1.40x in FY2026.

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