Office demand rises, vacancies fall

With improving occupancies in Grade-A office units, vacancy level is seen further easing in FY26.

- Harsha Jethmalani [e-mail]

After a decent first half (H1FY26), the demand for Grade-A office spaces is expected to sustain in H2FY26 as well. The top six Indian cities saw net absorption of 36 million square feet (msf) in H1, outpacing 30.6msf of new supply, ICRA data showed. Net absorption is the total square feet that is physically occupied, minus the total square feet that is physically vacant during a specific period.

Global capability centres (GCCs), flex-space operators and banking, financial services, and insurance sectors remain the driving forces. GCCs spread across healthcare, manufacturing and technology industries are doing the heavy lifting. GCCs are typically companies of foreign origin that set up back-office and R&D operations in India.

Faster absorption of available office units has pushed occupancies higher and vacancies lower. Vacancy level slid to 14% in March from 15.6% a year earlier, and dropped to 13% by September. ICRA projects net absorption to hit an all-time high of 69-70msf in FY26 and vacancy level at 12.5-13%.