Office Leasing Demand Set To Rise 8-10% In FY26, Says Crisil Ratings

The net leasing of Grade A commercial office space in India is expected to rise 8-10% in the next financial year, according to a note by Crisil Ratings on Wednesday. The credit rating agency firm said that the rise is expected to bring total net leasing to 47-49 million square feet, driven by strong demand from sectors such as banking, financial services, and insurance and global capability centres.

GCCs will play a key role, contributing 30-40% of the net leasing activity in India, Crisil said, adding that these centres, covering various sectors including IT/ITeS, BFSI, and manufacturing, will likely continue to boost leasing demand, mainly in Bengaluru and Hyderabad.

Grade A office space completions are expected to reach around 52 million square feet this fiscal, followed by 55-58 million square feet in the next. Almost half of this new supply will likely be in Bengaluru and Hyderabad, driven by demand from GCCs. Vacancy rates are expected to decline to about 17% over the next two fiscal years, with Crisil-rated office players predicting vacancy levels of 7-9% by the end of the next fiscal.

“India’s rich talent pool and cost advantages have enabled GCCs to evolve beyond their traditional role of providing support services,” the report noted. “Instead, they are integrating business operations and emerging as strategic hubs that leverage cutting-edge technologies.”

The report highlights that steady cash accrual from contracted rental escalations, a modest uptick in occupancy levels, and prudent leverage will keep the credit profiles of Crisil-rated commercial real estate office players healthy. “Improving occupancy levels and steady rental growth will lead to an increase in the cash flows of Crisil-rated office players, keeping credit profiles healthy even as players expand their portfolios,” said Snehil Shukla, Associate Director at Crisil Ratings.

Crisil Ratings also cautioned about potential risks that could impact leasing demand. “Any sluggishness in economic growth or adverse changes in global regulations affecting hiring and the overall business expansion plans of companies could impact leasing and will bear watching,” the report stated. Additionally, the sustenance of prudent leveraging by the players will remain a key monitorable.