The net absorption of commercial office leasing across the top six cities, namely Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai Metropolitan Region (MMR) and Pune is likely to increase by 10-11% to 59-60 million square feet (msf) in FY2025 and witness a further growth of 3-4% in FY2026 on a high base, said rating agency ICRA in a report.
The agency said that despite an influx of a huge supply of 125-130 msf in FY2025 and FY2026, the vacancy levels are expected to remain range-bound at 14.5-14.7% by March 2025 and improve to 14.0-14.5% by March 2026, supported by resilient absorption trends.
Anupama Reddy, Vice President and Co-Group Head – Corporate Ratings, ICRA said, “Leasing activity remained firm with net absorption of 54 msf in FY2024 and 44 msf in 9M FY2025 for the top six office markets in India, supported by strong demand from global capability centres (GCCs) and domestic corporates, increase in physical occupancy in office spaces and revival of IT-SEZs with regulations around floor-wise denotification. This has resulted in 70 bps decline in vacancy levels to 14.7% as of December 2024 from March 2024. On an overall basis across top six office markets, the healthy absorption trends are expected to continue in the medium term and occupancies are expected to reach decadal high by March 2026 to 85.5-86.0%.”
The rental income for retail mall operators is expected to increase by 7-8% YoY growth in FY2025 and 8-9% in FY2026, driven by healthy occupancy levels, growth in trading values and rental escalations. Across the top six cities in India, new supply of 9-9.5 msf is expected in FY2025 and FY2026, respectively. The vacancy levels rose to 21% as of December 2024 due to higher new supply, which has become operational recently and is yet to ramp up fully. The occupancy levels are expected to sustain at 79-80% as of March 2025 and remain at similar levels by March 2026, ICRA added.
“The consumption growth for ICRA’s sample set of retail mall operators is expected to moderate to 6-7% in FY2025 compared to 9% in FY2024 on account of the slowdown witnessed in H1 FY2025 due to the General Elections, heat waves and the extended monsoons. Consumption is expected to ramp up in H2 FY2025, driven by the festive and wedding season. In addition, segments like hypermarket, food, apparel, accessory and jewellery are expected to drive consumption with recovery in family entertainment centres (FEC). Trading values are expected to witness 8-9% YoY growth in FY2026. However, the increase in digital penetration and continued threat from e-commerce and q-commerce players, particularly in the retail (fashion) segment, which is extending to some of the premium brands, is a major challenge for the retail mall developers,” Reddy added.
