Commercial office market across top six cities approaches record low vacancy levels

Mumbai: India’s commercial office sector is entering a period of record absorption and tightening supply, according to new projections from rating agency ICRA. The firm expects net leasing activity across the country’s six largest office markets to reach unprecedented levels in the next two years, driving vacancy rates down to figures not seen in recent history.

ICRA estimates that net absorption will climb to between 69 and 70 million square feet in the financial year ending March 2026, surpassing the previous year’s tally of 66 million square feet. This momentum is forecast to continue into 2027, with absorption of more than 65 million square feet. The sustained demand is expected to push vacancy rates to 12.0–12.5 per cent by March 2027, a sharp fall from the 15.6 per cent recorded in March 2024 and 13 per cent in September 2025.

The agency notes that this will mark the third consecutive year in which demand outpaces new supply. Developers added 58 million square feet of new space in FY2025, yet leasing activity exceeded that figure. The first half of FY2026 has already seen 36 million square feet absorbed against 30.6 million square feet of new completions. This imbalance is strengthening the position of landlords and developers, with fundamentals improving across the board.

A major driver of this surge is the expansion of Global Capability Centres, or GCCs, which are increasingly choosing India as a base for strategic operations. ICRA projects that GCCs will account for 40 per cent of incremental office demand between April 2025 and March 2027, leasing 50–55 million square feet during that period. Their share of absorption has already stood at 35–37 per cent in FY2024 and FY2025.

Anupama Reddy, vice president and co-group head of Corporate Ratings at ICRA, said the resilience of GCCs has been striking despite global headwinds. “The surge in demand for office space is being driven by expanding global capability centres, flex-space operators, and the Banking, Financial Services, and Insurance sector. Despite policy tightening and trade restrictions in the US, office leasing activities by the GCCs in India have remained buoyant,” she explained. Reddy added that the combination of cost advantages, talent availability and policy support is setting the stage for a new era of growth and stability in the sector.

City-level trends underline the strength of this demand. Bengaluru continues to lead in net absorption and is projected to see vacancy rates decline from 9.2 per cent in September 2025 to between 7.5 and 8 per cent by March 2027. Chennai is expected to see vacancies dip to 5.5–6.0 per cent, reflecting limited new supply. Delhi NCR, which has historically carried the highest vacancy among the top six cities, is forecast to improve from 21 per cent to 19.5–20 per cent. Hyderabad and Pune are expected to maintain steady vacancy levels, while the Mumbai Metropolitan Region is likely to see further declines.

The broader picture is one of strengthening debt protection metrics and improved investor confidence. With vacancy rates projected to reach historic lows, ICRA believes the sector will remain attractive to both domestic and international investors. Policy support and scalable technology infrastructure are reinforcing India’s position as a global office hub.

The agency’s analysis suggests that the expansion of GCCs is not a short-term phenomenon but a structural shift. Their incremental demand for leased space signals long-term commitment from global enterprises, supported by state-level incentives such as subsidies, training programmes and infrastructure development. This is expected to accelerate investment flows and deepen India’s role in global corporate strategies.

The figures also highlight the resilience of India’s office market in the face of international uncertainty. While global economic conditions remain challenging, the country’s combination of competitive costs, skilled workforce and supportive policy environment is sustaining demand. The sector’s fundamentals are improving, with absorption consistently outpacing supply and vacancy rates falling to levels that indicate a tightening market.

ICRA’s projections point to a sector entering a new phase of stability and growth. Net absorption is expected to remain strong through FY2026 and FY2027, underpinned by GCCs, BFSI firms and flex-space operators. Vacancy rates are forecast to reach historic lows, while city-level performance shows broad-based improvement. For landlords, developers and investors, the outlook is one of strengthening fundamentals and sustained demand.

The coming two years will test the sector’s ability to balance record absorption with new supply. Yet the projections suggest that India’s office market is well positioned to capitalise on emerging opportunities, with GCCs at the forefront of this transformation. As Reddy noted, “The sustained demand from the GCCs and BFSI, coupled with India’s cost and talent advantages, is setting the stage for a new era of growth and stability in the sector.”

At a time when global markets face uncertainty, India’s office sector is charting a path of resilience and expansion. The figures released by ICRA indicate that vacancy rates are heading for historic lows, driven by record leasing activity and structural demand from global enterprises. The sector’s fundamentals are strengthening, and its role as a global office hub is becoming more firmly established.