Net office absorption in 6 major cities to hit record high in FY26: Report

GCCs, flexible office space operators and BFSI sector pushing vacancy rates to multi-year lows, says Icra

Net absorption of commercial office leasing in six major cities is expected to reach a record 69–70 million square feet (msf) in FY26, according to a report by ratings agency Icra.

 

The trend in Bengaluru, Chennai, Delhi National Capital Region, Hyderabad, Mumbai Metropolitan Region and Pune is likely to outpace incremental supply for the third year straight. Vacancy rates are forecast to fall to 12.5–13 per cent by March 2026 and further to 12–12.5 per cent by March 2027 — levels not seen in the sector’s recent history.

 

Given the robust fundamentals of the sector, leasing is expected to sustain in FY27 as well, with expectations of over 65 msf absorption, Icra noted.

   

Net absorption was 66 msf in FY25, marking a 15 per cent growth from the previous year and surpassing new supply of 58 msf. The momentum carried into the first half of FY26, with 36 msf of net absorption recorded, outpacing the 30.6 msf of new supply. Vacancy rates have declined to 14 per cent as of March 2025 from 15.6 per cent a year earlier, and further to 13 per cent as of September 2025.

 

“The surge in demand for office space is being driven by expanding global capability centres (GCCs), flex-space operators and the banking, financial services and insurance (BFSI) sector. Despite global headwinds, including policy tightening and trade restrictions in the US, office leasing activities by the GCCs in India have remained buoyant,” said Anupama Reddy, vice-president and co-group head, corporate ratings, Icra.

 

GCCs are expected to lease 50–55 msf April 2025 to March 2027, accounting for about 40 per cent of incremental office demand over the duration. “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,” Reddy said.

 

GCCs accounted for 35–37 per cent of total net absorption during FY24–FY25.

 

City-wise, Bengaluru continues to lead in net absorption and is projected to see vacancy rates decline from 9.2 per cent in September 2025 to 7.5–8 per cent by March 2027.

 

The sector is expected to remain an attractive destination for both domestic and international investors amid ongoing policy support and resilient, scalable technology infrastructure, according to the report.