Office Leasing Set For Historic Surge As Indian Market Redefines Itself

What’s Powering the Boom?

• Global Capability Centres: Leading the charge are GCCs, accounting for as much as 40% of fresh leasing each year. By anchoring major backend and tech operations, they’re insulating the market against softer IT/ITeS demand and exporting growth to India’s urban hubs.
• Flex Operators: Coworking giants and flex-space providers are expanding rapidly, responding to corporates’ needs for agile, scalable workspaces. Their investments are concentrated in essential metros—Bengaluru, Hyderabad, NCR, and Mumbai.
• BFSI Surge: The banking and financial sector is stepping up, with double-digit leasing growth thanks to steady credit expansion, strong hiring, and new forays into Tier II cities.

Supply, Demand, and the Metrics that Matter

• New Supply: While supply dipped to 47 million sq ft in FY25, it will rebound to 53–55 million in FY26, and 55–57 million in FY27 as developers carefully balance launches in high-vacancy micro-markets.
• Stock Growth: India’s Grade A office inventory is set to reach 925 million sq ft by FY27, up from about 810 million at March 2025.
• Vacancy Rates: Expected to fall from 16.5% to 15.5–16% as demand soaks up new space.

Micro-Market Highlights

• NCR and MMR: Anticipate a drop of 200–250 basis points in vacancy by FY27, driven by BFSI and IT demand.
• Southern Cities: Bengaluru, Hyderabad, and Chennai remain bedrocks for GCCs, absorbing supply steadily.
• Pune: Watch for a rise in vacancy as supply briefly outpaces absorption.

What Should Investors Watch?

• REITs and Rental Yields: A perfect storm of lower vacancies, rising rents, and easing interest rates is set to benefit REITs—especially those with strong southern and western portfolios. Fractional investors and direct office owners can expect stronger rental yields and potential for capital gains.

Read more about Indian REIT opportunities at nseindia.com.

• Credit Profiles: With cash flows improving and prudent leverage, developers’ debt-to-EBITDA ratio should fall to 4.0–4.2x by FY27 from 4.7x, while DSCR may climb to 2x, reflecting healthier balance sheets.

Macro Risks on the Radar

• Stay alert to international economic slowdowns, global interest rate swings, and any over-leveraging among new developers. These could dampen momentum—but for now, India’s office property cycle is firmly on the upswing.