ICRA Projects Record 70 msf Office Space Absorption in FY26; Vacancy to Hit Decade-Low Levels

Rating agency ICRA expects commercial office net absorption across India’s top six cities—Bengaluru, Chennai, Delhi-NCR, Hyderabad, MMR and Pune—to touch an all-time high of 69–70 million sq ft in FY2026. Backed by strong sectoral fundamentals, absorption is projected to remain robust at over 65 msf in FY2027.

With demand expected to outpace new supply for the third straight year, vacancy levels are likely to fall sharply to 12.5–13% by March 2026, and further to 12–12.5% by March 2027—the lowest in recent years.

The sector has already posted healthy gains. Net absorption rose 15% year-on-year to 66 msf in FY2025, surpassing new supply of 58 msf. The trend continued into H1 FY2026, with 36 msf absorbed, significantly higher than the 30.6 msf of fresh supply. Vacancy rates have eased from 15.6% in March 2024 to 14% in March 2025, and further down to 13% by September 2025.

Anupama Reddy, Vice President and Co-Group Head, Corporate Ratings, ICRA, said, “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. ICRA expects the GCCs to lease 50–55 msf during Apr-2025 to Mar-2027 period, accounting for around 40% of incremental office demand over the said 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.”