Mumbai, 23rd January 2025: Net absorption of commercial office space across India’s top six markets is projected to exceed 60 million square feet (msf) in FY2026, the highest ever, according to a report by ICRA. The cities—Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai Metropolitan Region (MMR), and Pune—are expected to achieve a 3-4% increase in absorption over FY2025’s estimated 59-60 msf.

Despite a surge in new office space supply of 125-130 msf across FY2025 and FY2026, vacancy levels are anticipated to decline to 14-14.5% by March 2026, marking a multi-year low. This trend is driven by robust demand from global capability centers (GCCs), domestic corporates, increased physical occupancy in offices, and revival in IT-SEZ spaces due to regulatory changes.

“Leasing activity has remained resilient, with net absorption reaching approximately 54 msf in FY2024 and 44 msf during the first nine months of FY2025. Vacancy levels dropped by 70 basis points to 14.7% as of December 2024, compared to March 2024. By March 2026, occupancies in the top six markets are expected to reach a decade-high of 85.5-86%,” said Anupama Reddy, Vice President and Co-Group Head – Corporate Ratings, ICRA.

India’s Office Market Resilient Amid Global Slowdown

The Indian office market has defied global economic sluggishness due to its cost-effective, highly skilled workforce, a growing domestic economy, and competitive rental prices. These factors continue to attract global firms, strengthening India’s position as a preferred real estate investment destination.

ICRA expects the credit profiles of office space operators to remain stable, supported by an increase in net operating income (NOI). The debt-to-NOI ratio for operators is forecasted to improve to 3.9-4x by March 2026, compared to 4.3-4.4x by March 2025. Debt service coverage ratios (DSCR) are projected to rise to 1.45-1.5x in FY2026 from 1.35x in FY2025.

Retail Malls See Growth Amid Challenges

Retail mall operators are also expected to witness growth, with rental income projected to increase by 7-8% year-on-year in FY2025 and 8-9% in FY2026. New mall supply of 9-9.5 msf each year in FY2025 and FY2026 is expected to stabilize vacancy levels at 21% as of December 2024 and maintain occupancy rates of 79-80% through March 2026.

“Retail consumption growth is expected to moderate to 6-7% in FY2025 due to the General Elections, weather disruptions, and the impact of extended monsoons. However, a rebound is anticipated in H2 FY2025, driven by the festive and wedding seasons. Segments such as food, apparel, accessories, and hypermarkets will continue to drive growth,” added Reddy.

Despite the positive outlook, challenges persist for retail mall operators, including the growing competition from e-commerce and q-commerce platforms, which are increasingly impacting even premium brands in the fashion segment.

ICRA estimates the debt-to-NOI ratio for mall operators to improve to 4.2-4.5x by March 2026 from 4.6-4.8x in March 2025, driven by rising NOI levels. DSCR is expected to remain stable at 1.45-1.5x during FY2025-FY2026, indicating a healthy financial outlook for the sector.

Conclusion

The sustained growth in India’s office and retail real estate markets underscores the country’s resilience and potential as a global investment hub, driven by its robust economic fundamentals and growing demand for quality commercial spaces.

Bengaluru office demandAlso Read:

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A decade of infrastructure expansion in India, led by expressway development, has transformed connectivity and reshaped real estate opportunities across the country. Colliers India, in its latest report titled “Top 30 Emerging Cities of India”, has identified Nagpur, Jaipur, and Lucknow as the top three performers among 30 emerging cities assessed for growth potential in infrastructure, demographics, and economic factors.

Nagpur, backed by the Mumbai–Nagpur Expressway (Samruddhi Mahamarg), ranked first, followed by Jaipur and Lucknow. These cities, along with five other micro-markets—Ahmedabad (Shela), Agra (Shastripuram), Meerut (Ganga Nagar), Chandigarh (Kharar), and Bhopal (Indus Towne)—have shown significant potential for land price appreciation, with some areas expected to witness a 5.2x increase by 2035.

Expressways: Key Drivers of Growth

The rapid expansion of India’s expressway network, under initiatives such as the Bharatmala Pariyojana, has been instrumental in unlocking the economic and real estate potential of underdeveloped regions. Expressways such as the Samruddhi Mahamarg, Yamuna Expressway, and Dwarka Expressway have catalyzed urbanization by improving connectivity, fostering integrated township development, and boosting tourism.

“Expressways drive urban and economic growth by enhancing accessibility, which, in turn, increases demand for real estate. Investors and homebuyers should capitalize on the current opportunities in micro-markets along these expressways, where land values are projected to grow significantly,” said Swapnil Anil, Managing Director, Advisory Services, Colliers India.

Nagpur: A Rising Investment Hub

The 701-km Samruddhi Mahamarg has positioned Nagpur as a premier investment destination, with land prices around the Samruddhi Circle area projected to rise from INR 3,300 per sq. ft. in 2024 to INR 17,213 per sq. ft. by 2035—a 5.2x increase. This rapid growth outpaces other emerging micro-markets, including Shela in Ahmedabad and Shastripuram in Agra.

Key Micro-Market Land Price Projections

This report underscores the growing influence of expressway connectivity in shaping India’s real estate landscape and highlights emerging cities as lucrative investment opportunities for the next decade.

Also Read: Mumbai Nagpur Expressway

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Road Sector:

• The government has placed a major emphasis on the road sector, including expressways and rural roads. Notable projects include the Bharatmala Pariyojana and the Vision 2047 initiative. The first tranche of eight National High-Speed Corridor projects, costing approximately Rs 50,655 crore, will develop 936 km of highways. Additionally, Rs 40,000 crore to Rs 50,000 crore worth of access-controlled projects are in the pipeline. The goal is to approve Rs 2 trillion worth of highway projects by December and to expand expressways to 50,000 km by 2037.

Railways:

• A new 309 km railway line between Manmad in Nashik and Indore has been approved, costing Rs 18,036 crore. This project will reduce the distance between Mumbai and Indore by 188 km. Furthermore, four metro rail projects totaling Rs 30,766 crore and eleven additional railway projects with 967 km of new lines and 121 km of multi-tracks, costing Rs 31,133 crore, have been greenlighted.

Ports:

• The government has approved the development of a mega sea port at Vadhavan in Maharashtra with a budget of Rs 76,220 crore. This port is expected to rank among the top ten ports globally.

Aviation:

• New terminals are planned for Patna and Bagdogra airports, with a combined cost of Rs 2,969 crore. Additionally, a new airport at Varanasi will be constructed at a cost of Rs 2,870 crore.

Hydropower and Industrial Cities:

• A revised scheme for supporting hydroelectric projects has been approved, alongside the establishment of 12 smart industrial cities.

These projects reflect the government’s commitment to enhancing infrastructure across various sectors, setting a strong pace for future development.

Also Read: Mumbai Coastal Road Project Achieves Major Milestone, Signaling Progress

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