Net leasing of Grade A commercial office space in India is projected to increase by 10-12%, reaching 41-43 million square feet in FY25, according to a report by Crisil Ratings. This growth is driven by strong demand from global capability centres (GCCs), the banking, financial services, and insurance (BFSI) sectors, and the manufacturing industry. After years of gradual recovery, the office leasing market is set to accelerate, aided by improved absorption rates and the denotification of underperforming special economic zones (SEZs).

GCCs, which span multiple sectors, are expected to account for 40-45% of the total net leasing in India this fiscal year. The report highlights that new entrants and expanding GCCs fuel the demand for office space. “The vacancy level, which had shot up 600 basis points between fiscal 2020 and 2024 amid the pandemic, is expected to plateau at 17.4-17.5% this fiscal,” said Gautam Shahi, Director of Crisil Ratings.

The information technology (IT) and IT-enabled services (ITeS) sectors, traditionally key players in office space demand, will grow slower this year, contributing 20-25% of the overall demand. While domestic IT growth remains tepid, IT and ITeS GCCs are expected to maintain steady demand for office space.

In addition to GCCs, robust demand from the engineering, manufacturing, and BFSI sectors will further bolster office leasing activity. These industries account for 35-40% of the net leasing demand, driven by India’s growing economy and increased offshore demand for business processes through GCCs.

The report also notes that while vacancy rates rose during the pandemic, the commercial office space market is stabilising. With strong demand from key sectors and a steady office space supply, India’s commercial real estate market is poised for significant growth in FY25.

As office leasing demand picks up, developers are expected to meet this rising need with new and innovative office solutions, reflecting the ongoing transformation in India’s commercial real estate sector.