In a significant development, Global Capability Centres (GCCs) have emerged as major drivers of office leasing in India, accounting for approximately 37% of the total office leasing activity in the first half of 2024, according to a recent report by CBRE South Asia Pvt. Ltd. This surge underscores the growing influence of GCCs in shaping the Indian commercial real estate landscape.

The report highlights that BFSI firms and technology companies were the primary contributors to this leasing activity, making up around 45% of the total leasing by GCCs during this period. In numerical terms, GCCs leased an impressive 11.9 million square feet of office space from January to June 2024. This robust performance reflects India’s confidence and strategic importance as a hub for global operations.

City-Wise Distribution of GCC Leasing

Bengaluru led the pack with the highest share of GCC leasing at 39%, followed by Pune at 20%. Hyderabad and Chennai also contributed significantly, with 17% and 11% shares, respectively. This geographic distribution highlights the strategic importance of these cities as prime locations for GCCs.

Overall Office Leasing Trends

Pan-India Leasing Activity

On a pan-India basis, overall office leasing remained strong, with gross office leasing reaching 32.8 million square feet during the first half of 2024, marking a 14% year-on-year increase across nine cities. These cities include Bengaluru, Mumbai, Delhi-NCR, Hyderabad, Chennai, Pune, Kochi, Kolkata, and Ahmedabad. Additionally, the total supply of office space during this period was recorded at 22.1 million square feet.

Leading Cities in Office Space Absorption

Bengaluru once again emerged as the leader in office space absorption, accounting for about one-fourth of the total leasing activity. Delhi-NCR followed with a 16% share, while Chennai, Pune, and Hyderabad each contributed 13%. Notably, Bengaluru, Hyderabad, and Mumbai were the frontrunners in supply additions, collectively accounting for 69% of the total supply during the same period.

Sectoral Insights

Sector Contributions to Leasing

Technology companies had the highest share in office leasing at 28%, followed by flexible space operators at 16%, BFSI firms at 15%, engineering and manufacturing (E&M) at 9%, and research, consulting & analytics (RCA) firms at 8%. This diverse tenant mix underscores the broad-based demand for office space across various sectors.

Domestic Firms Leading Absorption

Domestic firms led the absorption, comprising 43% of the market during the first half of 2024. Flexible space operators, technology firms, and BFSI corporates predominantly drove this domestic leasing activity. This trend highlights the growing preference for domestic companies to expand their footprint in the Indian office market.

Quarterly Performance

Office Leasing in Q2 2024

Quarterly office leasing in the April-June 2024 period stood at 18.0 million square feet, marking a 27% increase compared to the same period in 2023. Bengaluru, Pune, and Chennai were the leading cities in terms of absorption, together accounting for about 57% of the leasing activity.

Development Completions and Sustainability

Development completions during April-June 2024 amounted to approximately 13.2 million square feet, reflecting a 49% quarter-on-quarter increase and an 11% year-on-year rise. Bengaluru, Mumbai, and Hyderabad were key contributors to this supply addition, holding a 69% share. Notably, the non-SEZ segment dominated development completions with a 90% share in Q2 2024. Developers continued their efforts towards sustainability, with over three-fourths of the newly completed space being green-certified (LEED or IGBC-rated).

Future Outlook

Continued Demand and Expansion

The office sector is expected to witness continued demand for quality office space in the second half of 2024 as occupiers expand and solidify their presence. With average office utilization rates rising, occupiers re-evaluate their leasing and portfolio strategies to accommodate their growth plans. Companies plan to expand their office footprint through a mix of traditional and flexible spaces to support workforce growth and enhance service delivery in new markets.

India remains highly attractive for occupiers due to its skilled workforce and mature corporate environment. The continuity of the present government for a third consecutive term enhances market stability and fosters a positive outlook for the office sector. The technology sector continues to be a major driver of leasing activity, but there is an anticipated shift towards a more diversified demand base in 2024. BFSI firms, flexible space operators, and E&M companies are expected to show substantial growth in leasing activity.

Regional Insights

Cities like Bengaluru, Hyderabad, Delhi-NCR, and Mumbai remain key gateway markets for the office sector. Smaller markets such as Chennai and Pune are projected to experience significant growth in office space absorption in the current year. Improved infrastructure, skilled workforce availability, and competitive rentals in Tier-II cities like Ahmedabad, Coimbatore, Indore, and Nagpur may attract strategic expansions by companies.

Core + Flex Strategies

Occupiers are integrating flexible office space into their portfolios as part of their ‘Core + Flex’ strategies. Workplaces are transforming into collaborative hubs, driving the anticipated growth of flexible space stock to 80 million square feet by the end of 2024. This growth is expected to be fueled by an emphasis on sustainability, quality, customisation, and enterprise solutions, contributing to continued operator expansion.

GCC Expansion and Future Prospects

India is set to maintain its appeal for GCCs, driven by a large engineering workforce, competitive costs, and a well-established ecosystem. An anticipated 20% increase in GCCs by 2025 signals substantial growth potential for the Indian office market. Approximately 67% of GCCs plan to expand their office portfolios by more than 10% over the next two years. Established players are exploring large-scale campuses in major cities, while new entrants are leaning towards flexible workspace solutions for scalability.

Global firms in the BFSI, technology, and E&M sectors are expected to expand their GCC services in India, potentially establishing multifunctional centres to support their operations. Occupiers focus on enhancing the workplace experience through various initiatives, including incorporating employee wellness into workplace strategies.

Bottom Line

The Indian office sector is poised for continued growth, driven by diversified tenant demand and robust economic growth. As occupiers prioritise employee experience, the trend towards ‘flight-to-quality’ relocations and upgrades is expected to continue. Developers increasingly focus on constructing state-of-the-art, green-certified office facilities with amenities catering to modern business needs. The second half of 2024 is expected to see a steady supply of high-quality office spaces, with Bengaluru, Hyderabad, and Delhi-NCR leading in project completions. Introducing quality supply amidst limited availability will likely drive rental growth in select micro-markets nationwide.