India’s grade A office leasing sees 10-12% growth

Grade A office leasing in India expects a 10-12% rise in FY25, driven by GCCs, BFSI, and demand for manufacturing sectors. This growth will help reduce vacancies despite the high office supply. IT/ITeS demand will stay steady, with overall leasing supported by economic expansion.

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The net leasing of Grade A commercial office space in India is anticipated to grow by 10-12% to reach 41-43 million square feet in FY25, driven by strong leasing demand from global capability centers (GCCs), the banking, financial services, and insurance (BFSI) sector, and the manufacturing industry, as reported by Crisil Ratings. This increase in absorption will help mitigate rising vacancy rates, partially supported by the denotification of underperforming units in special economic zones (SEZs).

After four years of gradual recovery, net leasing is expected to accelerate this fiscal year, while the supply of commercial office space is likely to remain high, consistent with the previous fiscal year’s levels, according to the report. GCCs, covering various sectors, are projected to account for 40-45% of India’s total net leasing this fiscal, driven by new entrants establishing office spaces and existing ones expanding their operations.

Gautam Shahi, director of CRISIL Ratings, stated, “The vacancy level, which had shot up 600 basis points (bps) between fiscal 2020 and 2024 amid the pandemic, is expected to plateau at 17.4-17.5% this fiscal.”

While IT and IT-enabled services (ITeS) companies, which contribute 20-25% of the overall demand, are expected to experience low single-digit growth due to the slow growth of domestic firms, demand from IT/ITeS GCCs is expected to remain steady.

The engineering, manufacturing, and BFSI sectors, which together make up 35-40% of net leasing demand, will continue to drive healthy demand, fueled by the ongoing growth of the Indian economy and increased offshore demand through GCCs.