The credit profiles of office players and mall operators are expected to remain stable in FY2027, supported by healthy net operating income (NOI) growth, resilient occupancies and contracted rental escalations. Comfortable leverage and debt coverage metrics should continue to support rating stability, notwithstanding portfolio expansion and incremental debt. This operating resilience is also reflected in the rating trend in 5M FY2027, with nine upgrades against one downgrade across office and retail mall developers.
Key Highlights:
- India’s office leasing outlook for FY2027 is expected to be anchored by the sustained expansion of global capability centres (GCCs), which continue to account for a significant share of incremental office demand. The ongoing migration of global functions to India, coupled with investments in technology, engineering and artificial intelligence (AI)-led operations, is expected to drive leasing activity across major office markets. Supported by India’s skilled talent pool, established office ecosystems and cost advantages, Bengaluru, Hyderabad, Chennai and Delhi-NCR are expected to remain key beneficiaries of GCC expansion.India’s top six office markets* recorded a net absorption of ~70 million square feet (msf) in FY2026, surpassing supply additions of 57.8 msf and reducing vacancy levels to 12.2% from 14.1% a year ago. Despite the expected fresh supply of 58-60 msf in FY2027, robust GCC-led demand supported by flex-space players and domestic corporates, is likely to drive strong net absorption. This is expected to drive occupancy levels to 88.5-89.0% and lower vacancy levels to 11.0-11.5% by March 2027.
Healthy tenant sales, increasing footfalls and ongoing expansion plans of retailers are expected to sustain leasing momentum and occupancy levels across organised retail malls. Demand for quality retail spaces from established brands and emerging concepts is likely to remain steady, facilitating lease renewals and incremental leasing. Improved consumption in discretionary categories such as fashion, electronics, food and entertainment should translate into healthy tenant performance, thereby supporting stable cash flows for mall assets.
- Despite the addition of 3.5-4.0 msf of new Grade A retail mall supply in FY2027, vacancy levels are expected to remain stable at 11.5-12.0%, supported by sound demand from retailers and approximately 35% pre-leasing of the upcoming supply. Contracted rental escalations, lease renewals and sustained tenant trading performance are expected to support 9.5-10.0% growth in rental income and NOI for mall operators in FY2027.