Mumbai: Net leasing of Grade A commercial office space in India will clock a healthy Compound Annual Growth Rate (CAGR) of 7–9 per cent in the two financial years through 2027 and cross the 50 Million Square Feet (MSF) mark in the next financial year, according to a Crisil Ratings report released on Thursday.
Supply, on the other hand, is expected to be 53-57 MSF annually, thereby driving 6.5-7 per cent CAGR expansion in the overall office stock during this period.
Consequently, occupancy levels are expected to improve, which will increase cash flows for commercial office players. This, coupled with prudent leverage, will keep credit profiles stable, the report states.
The study is based on 78 commercial office players, accounting for about a fourth of the Grade A office stock in the country.
After a remarkable recovery in the past two financial years, India's commercial office market is set for steady net leasing growth over the medium term, driven by reduced work-from-home arrangements and strong demand from Global Capability Centres (GCCs), the report states.
GCCs continue to remain a key driver of growth, encouraged by India's large, skilled talent pool and cost advantages. They now account for 30-40 per cent of annual net leasing of commercial office space across sectors.
From a sectoral perspective, over the next two fiscals, net leasing will be driven by double-digit growth from the BFSI sector and companies offering flexible workspaces.
Growth in the BFSI sector is being driven by steady credit growth, increasing assets under management and employee additions.
Flexible workplace operators will continue to expand by offering agile, cost-effective and hybrid-friendly solutions to companies, according to the report.
In contrast, the net leasing growth by IT/ITeS sector is expected to remain moderate, with demand growing 5-6 per cent.
This will be driven by GCCs as net leasing by domestic companies in the IT/ITeS space remains low, the report observes.
On the supply side, commercial office space additions, which moderated a tad to around 47 MSF last fiscal, is expected to increase to 53-55 MSF this fiscal with the scheduled completion of several ongoing projects.
Supply is expected to be steady at 55-57 MSF next fiscal, with developers calibrating their pipelines amid higher vacancies in certain micro-markets, according to the report.
As a result, the overall office stock is projected to expand to around 920-925 MSF by the end of fiscal 2027, from approximately 810 MSF as of March 2025.
Crisil Ratings director Gautam Shahi said, “With healthy demand absorbing the elevated supply, the overall vacancy level for India’s Grade A office market is expected to decline to 15.5-16 per cent by the end of fiscal 2027. That will mark a 100 basis points (BPS) improvement over fiscal 2025. While overall vacancy is expected to reduce over this period, the trend will vary across micro-markets.”
The National Capital Region and the Mumbai Metropolitan Region, which together account for about a third of the commercial office inventory, may see vacancy levels decline 200-250 BPS on strong demand from the BFSI, flex and IT/ITeS sectors.
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