The demand for Grade A commercial office space in India is expected to grow by 8-10% in fiscal year 2026, driven by key sectors such as banking, financial services and insurance (BFSI), global capability centers (GCCs), and the increasing presence of flexible workspace operators, as published by The Economic Times, according to Crisil Ratings.
This follows a 14-16% surge in leasing activity in the current fiscal year, surpassing pre-pandemic levels and exceeding earlier projections. Net leasing of Grade A office space is expected to reach 47-49 million square feet in FY26, building on this year’s momentum.
GCCs continue to be a major contributor to office space leasing, accounting for 30-40% of net leasing activity across sectors such as IT and IT-enabled services (IT/ITeS), BFSI, and manufacturing. Bengaluru and Hyderabad, which represent nearly two-thirds of GCC-driven demand, are expected to see continued expansion as new centers emerge and existing ones grow.
“From a sectoral perspective, BFSI players and flex space operators will lead the 8-10% growth in net leasing next fiscal,” said Gautam Shahi, director at Crisil Ratings. “Non-banking financial companies and private sector banks will see steady growth, driven by higher assets under management and workforce expansion. Meanwhile, flexible space operators will aggressively expand in Tier 1 and Tier 2 cities, providing cost-effective and hybrid-friendly office solutions.”
In contrast, leasing demand in IT/ITeS and the manufacturing and engineering sectors is expected to grow at a more moderate pace, around mid-single digits.
The supply of Grade A office space remains robust, with completions projected at 52 million square feet in the current fiscal year and 55-58 million square feet in the next. Bengaluru and Hyderabad will account for nearly half of this new supply, supported by strong demand from GCCs.
With net leasing growth slightly outpacing supply, vacancy rates are expected to moderate to 17% over the next two years.
Improving occupancy levels and steady rental growth will bolster the financial health of major office space operators, Crisil Ratings noted. “Cash flow improvements will help keep credit profiles stable, even as developers expand their portfolios,” said Snehil Shukla, associate director at Crisil Ratings.
The debt-to-EBITDA ratio for Crisil-rated office players is projected to remain stable at 4.3-4.5 times in FY25 and FY26, consistent with FY24 levels.
Despite positive momentum, potential risks include a slowdown in economic growth or regulatory changes that could impact hiring and corporate expansion plans. Additionally, maintaining prudent financial leverage will be a key factor to monitor in the coming years.
That said, any sluggishness in economic growth or adverse changes in global regulations affecting hiring and overall business expansion plans could impact leasing activity and remain key areas to watch.