GCCs Drive India’s Office Leasing: India as the “Office to the World”

Dominance of GCCs

Global Capability Centres (GCCs) have emerged as major players in India’s office leasing landscape, accounting for an impressive 37% share of total office leasing in the first half of 2024. These centres, established by multinational corporations, leverage India’s skilled workforce and competitive costs. This significant presence highlights India’s journey toward becoming the “Office to the World.”

Confidence in the Indian economy continues to drive leasing activity, with GCCs expanding their footprint. India’s skilled workforce and diverse ecosystem attract international businesses, reinforcing the country’s real estate growth momentum.

Return to Office Dynamics

India’s top seven cities have witnessed impressive growth in gross leasing volumes. In Q1 2024, these cities collectively recorded over 13.8% year-on-year growth in gross leasing, surpassing 15 million sq ft for the third consecutive quarter. Chennai, Delhi NCR, Mumbai, and Pune stood out with record-high leasing volumes, driven significantly by domestic occupiers in the BFSI and technology sectors.

Navigating Accelerated Growth and Renewed Optimism

Demand Continues to Strengthen

Talent Pool Magnet

India’s skilled workforce remains a magnet for companies, driving demand for high-quality office spaces. As the economy rebounds, more businesses are looking to expand, further increasing the need for premium commercial real estate.

India’s Office Market

Sustainability Matters

Tenants are increasingly prioritizing sustainable spaces, emphasizing environmental, social, and governance (ESG) compliance. This trend reflects a broader global shift towards sustainability, becoming a critical factor in real estate decisions.

Navigating Accelerated Growth and Renewed Optimism

Robust Supply Pipeline and Rental Growth

Expansion in Tier 2 Cities

Limited supply in core markets has driven interest towards tier 2 cities. The supply pipeline remains robust, paving the way for growth in 2024. GCCs are expanding their footprint, strengthening India’s position as a growth market.

India’s Office Market

Significant Supply Increases

New supply increased by 49% quarter-on-quarter (Q-o-Q) and 11% year-on-year (Y-o-Y), totalling 13.2 million sq. ft. in Q2 2024. Bengaluru, Mumbai, and Hyderabad were the primary contributors to this supply surge, accounting for a cumulative share of 69%. In the first half of 2024 (H1 2024), approximately 22.1 million sq. ft. of new completions were witnessed, representing a marginal decline of 3% Y-o-Y. However, expectations are high for a surge in development completions during the second half of 2024 (H2 2024), further bolstering transaction activity.

India’s Office Market

Rental Growth and Flex Momentum

The rise of hybrid work models has fuelled demand for flexibility in leases. Start-ups, SMEs, and large corporations are all seeking flexible spaces, reflecting a broader shift in workplace dynamics. More than three-fourths of newly completed office space during Q2 2024 was green certified, underscoring the importance of ESG compliance in real estate decisions.

Navigating Accelerated Growth and Renewed Optimism

The Rise of Flexible Office Spaces

Growing Demand

Flexible office spaces are reshaping India’s commercial real estate landscape. Companies allocating over 10% of their office portfolios to flexible workspaces are expected to increase from 42% in Q1 2024 to 58% by 2026. Confidence in India’s economic prospects fuels leasing activity, with flexible spaces now accounting for 21% of total transactions.

Navigating Accelerated Growth and Renewed Optimism

Office Transactions Reach New Heights

H1 2024 Performance

India’s office market witnessed a record 34.7 million sq ft of transactions in the first half of 2024, marking a 33% year-on-year growth. Bengaluru dominated with 8.4 million sq ft of transactions, representing 26% of the total volume. The city’s tech ecosystem continues to attract occupiers, with co-working spaces and other flexible options contributing significantly to the overall transaction volume.

Navigating Accelerated Growth and Renewed Optimism

Conclusion

India’s office market is vibrant, adaptive, and poised for further growth. As businesses embrace flexibility and global connectivity, India’s role as the “Office to the World” becomes increasingly significant. The surge in leasing activity, robust supply pipeline, and sustainability focus underscores the sector’s resilience and potential. Investors, occupiers, and policymakers must stay informed to harness the immense opportunities that lie ahead.

India’s Office Market