Chennai has emerged as a leading destination for multinational companies (MNCs) seeking office space in India, surpassing Bengaluru and Hyderabad in offshore leasing volumes for 2003. This shift can be attributed to Chennai’s unique selling points, such as lower rental rates and less congestion, which are highly appealing to MNCs seeking optimal locations. According to Knight Frank India data, Chennai secured 7 million square feet of leases, compared to 6.1 million in Hyderabad and 5.6 million in Bengaluru.

Vivek Rathi, the national director of research at Knight Frank India, highlighted the city’s growth, stating, “Leasing activity has been strong in Chennai for the past couple of years, driven by favourable commercial rentals and a robust supply of Grade A office spaces.” He further noted that approximately 84% of this leasing was concentrated in the global capability centre (GCC) segment, underlining the city’s strategic importance in the global business landscape.

The office leasing scene in Chennai has been significantly boosted by a strong manufacturing sector, particularly in electronics and automobiles, giving it a competitive edge over its counterparts. Despite a global IT slowdown that affected markets like Bengaluru, where domestic office leasing dropped by 14% year-on-year to 12.5 million square feet in 2023, Chennai’s market grew by about 92% to 10.2 million square feet in the same period.

Rathi expressed optimism about the future, emphasising the diversity of the sectors contributing to the growth: “With a healthy market in Chennai, the GCC sector saw the infusion of new non-IT sectors like global banking corporations and R&D companies.” He suggested that Chennai could maintain its lead in offshore leasing activities into CY2024 and beyond if the trend continues.

The increase in offshore leasing is part of a more significant trend observed across India, where leasing volumes by offshore companies increased by 26% to 27.3 million square feet last year. This aligns with global shifts toward cost-effective operational models as companies increasingly opt for offshoring to minimise expenses. Knight Frank India reports that offshoring has become a key driver of office demand in India and other Asia Pacific hubs like the Philippines, Malaysia, and Vietnam.

The growing prominence of India in the global offshoring industry is also reflected in its IT service exports, which are expected to expand from $185.5 billion in 2023 to $230.5 billion in 2025. The sector accounts for almost 60% of India’s overall service exports, illustrating the critical role of offshoring in the national economy.

As the office space landscape continues to evolve, Chennai’s rising prominence underscores its capacity to adapt and thrive in a changing global market, positioning it as a key player in the international business domain for years to come.