The vacancy level in India’s Grade A commercial office space is expected to gradually decrease by approximately 50 basis points (bps) to 15.5-16.0% by the end of the current fiscal, driven by a steady demand-supply gap resulting from a healthy net leasing growth and the scheduled completion of ongoing projects. This follows the trajectory of annual reduction in vacancy levels by around 50 bps in the past two fiscals, according to Crisil Ratings.

The current global uncertainties and challenges that could emanate from Artificial Intelligence (AI) led disruptions, do pose risks to our projection of decline in vacancy levels.

Nevertheless, steady cash accrual from contracted rental escalations and even lower vacancy levels along with prudent leveraging will keep the credit profiles of Crisil-rated commercial real estate office players stable. Our study of 120 commercial office spaces rated by Crisil Ratings—which account for about a fourth of the Grade A office stock in the country—indicates as much.

Leasing growth is expected to be mainly supported by double-digit growth from the flexible workspaces2 sector who are undertaking large capacity additions to meet rising demand. Meanwhile, leasing growth by the domestic information technology and information technology-enabled services (IT/ ITeS) and engineering & manufacturing companies remains moderate. The constant influx and expansion of global capability centres (GCCs), cutting across sectors, continues to support leasing growth even as risks loom.

Says Gautam Shahi, Senior Director, Crisil Ratings, “Overall, the net leasing is expected to grow at 6-7% this fiscal. However, this is exposed to risks related to disruptions in the IT/ ITeS sector on account of AI, which may impact hiring and expansions. Increased geopolitical uncertainties and tariff-related issues, too, may impact the leasing plans of GCCs. While these pose short-term challenges, India’s long-term structural advantages, including a large and skilled talent pool, cost competitiveness, policy-level support from central and state governments and broader economic stability, are expected to help the sector tide over the hiccups.”

Furthermore, trends vary across cities and micro-markets. From a regional perspective, the National Capital Region (NCR) and the Mumbai Metropolitan Region (MMR), which account for around a third of India’s commercial office inventory, are poised to experience a decline in vacancy levels by approximately 100 bps owing to limited new supply.

Similarly, the southern markets of Bengaluru, Chennai, and Hyderabad—which collectively account for around half of the office stock—are expected to see a reduction of up to 50 bps in vacancy levels, supported by healthy demand growth from flexible workspaces and GCCs.

Meanwhile, the vacancy level in Pune’s office market is likely to remain steady, after experiencing a significant surge last fiscal due to a substantial influx of new supply.

Over the past two years, strong demand and a subsequent decline in vacancy levels has benefitted players in securing favourable lease terms during renewal negotiations, resulting in mark-to-market gains. The lease rentals of Crisil-rated commercial office players have seen an annual growth of 8% over the last two fiscals through fiscal 2026.

Says Snehil Shukla, Associate Director, Crisil Ratings, “Contracted rental escalation and sustained low vacancy levels are expected to continue to enhance cash flows for Crisil-rated commercial office players. This, along with prudent leveraging by commercial real estate players, is likely to keep their credit metrics healthy. The median debt service coverage ratio and debt-to-Ebitda3 ratio are estimated at 1.5 times and 5.4 times for fiscal 2026 and projected at 1.6 times and 5.0 times, respectively for the current fiscal.”

That said, higher-than-expected leveraging by players will remain a key watch-out.