With SEZs turning into office spaces, India’s office demand set to rise: Nuvama Research

NEW DELHI: Office space demand in India is expected to strengthen as the conversion of Special Economic Zone (SEZ) areas into regular office spaces gathers momentum, according to a report by Nuvama Research.

The report highlighted that with SEZ space issues now easing, demand from Global Capability Centres (GCCs) and domestic companies is set to rise further. Nuvama Research stated, “We believe the office cycle has turned, and GCC demand is gaining traction. With the SEZ space issue behind us, we believe office demand should improve going ahead.”

The report also noted that retail consumption in India is on a structural uptrend, which supports the overall commercial real estate outlook. With the office cycle turning, leasing activity continued to gain momentum in Q2 FY26. GCCs accounted for 38 per cent of total demand during the quarter, while domestic companies across various sectors, including BFSI, IT, and flex space operators, also contributed significantly to gross leasing.

However, due to strong occupancies across real estate investment trusts (REITs), the overall gross leasing declined on a year-on-year and quarter-on-quarter basis. According to the report, committed occupancies have reached the 90 per cent mark for all REITs, indicating limited vacant space left for leasing. This shortage of available space has put pressure on gross leasing numbers.

In contrast, net leasing remained healthy in Q2FY26, reflecting the underlying strength of office demand in the country. Management teams across all office REITs remain confident that occupancy rates will continue to improve. This confidence is supported by the ongoing conversion of SEZ spaces into non-SEZ office areas, which is progressing at full pace.

The report said that following the government’s relief announcement in December 2023, all REITs have accelerated efforts to de-notify their SEZ spaces. Given the strong demand momentum, REITs have also fast-tracked their acquisition pipelines and capital expenditure plans. The active conversion of SEZ spaces is expected to further boost occupancies, supporting the next phase of growth in India’s office market. (ANI)