Office boom seen till FY26, but vacancy remains above 14%: ICRA

Bengaluru: Despite an influx of a huge supply of 125-130 million square feet (msf) in FY2025 and FY2026, the vacancy levels are expected to remain range-bound at 14.5-14.7 per cent by March 2025 and improve to 14.0-14.5 per cent by March 2026, supported by resilient absorption trends, according to information and credit rating agency ICRA Ltd.

Sharing this in webinar on Thursday, the agency shared that following a record office year, net absorption in India's top six office markets is set to exceed 60 million square feet (msf) by financial year 2025-26 FY26, the highest ever, on an already high base.

Net absorption is likely to increase by 10-11 per cent to 59-60 msf in FY25 and witness a further growth of 3-4 per cent in FY26. This surge is driven by strong demand from global companies and domestic businesses.

The top six cities considered are Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai Metropolitan Region (MMR) and Pune.

The rental income for retail mall operators is expected to increase by 7-8 per cent year-on-year (YoY) growth in FY25 and 8-9 per cent in FY26, driven by healthy occupancy levels, growth in trading values and rental escalations.

The vacancy levels rose to 21 per cent as of December 2024 due to higher new supply, which has become operational recently and is yet to ramp up fully. ICRA expects the occupancy levels to sustain at 79-80 per cent as of March 2025 and remain at similar levels by March 2026.

Trading values are expected to witness 8-9 per cent YoY growth in FY26.