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Office Leasing Faces AI, Geopolitical Threats
26 May
Summary
- Office space leasing expected to rise 6-7% this fiscal.
- Vacancy levels to decrease by 50 basis points to 15.5-16.0%.
- AI and geopolitical issues pose risks to office demand.
Net leasing of office space across India's top seven cities is anticipated to increase by 6-7% during the current fiscal year. Projections estimate net leasing to reach around 48-49 million square feet by the end of FY26. Concurrently, vacancy levels in Grade A commercial office spaces are expected to decline gradually by approximately 50 basis points, reaching between 15.5% and 16.0%.
Despite this positive outlook, several factors pose risks to demand. Geopolitical uncertainties and tariff-related issues may influence the expansion plans of Global Capability Centres. Furthermore, the increasing influence of artificial intelligence could disrupt the IT and ITeS sectors, potentially impacting hiring and company growth strategies.
While these factors present short-term challenges, India's long-term strengths, including a skilled workforce, cost competitiveness, supportive government policies, and economic stability, are expected to help the sector overcome these hurdles. Crisil Ratings acknowledges that AI-led disruptions and global uncertainties could affect the projected decrease in vacancy levels.
