Over the next two years, Global Capability Centers (GCCs) are expected to lease about 45-50 million square feet of office space, accounting for approximately 40 per cent of the total office demand across the top 6 cities, said a report by Colliers. Improved business sentiments and positive economic outlook is fostering heightened demand for office spaces in India, particularly signaling confidence among foreign origin companies seeking to establish their capability centers in the country, it added.
Interestingly, despite a weaker global outlook amidst pandemic and geopolitical tensions in the last 2-3 years, GCCs resumed their expansions in a steadfast manner, registering a 14 per cent YoY rise in leasing activity in 2023. The second half of 2023 particularly witnessed the highest GCC leasing activity since 2020, reaching 12.4 million square feet, according to Colliers’ latest report, titled “Global Capability Centers in India: A newfound wave of confidence”. The report highlighted the role GCCs will continue to play in shaping India’s commercial real estate landscape in near future. It said that the foreign companies will continue their expansions in India, further bolstering GSS demand in near to mid-term.
“With heightened GCC activity and sustained domestic demand, the outlook for India’s office market is indeed optimistic. Drawing confidence from India’s economic resilience, GCCs have swiftly resumed leasing activities, and are poised to play a pivotal role, contributing to over 40 per cent of the total office demand in the next 1-2 years. As Technology and BFSI sectors maintain their dominance, growing interest of occupiers from Engineering & manufacturing and Healthcare sectors promise to diversify the GCC landscape further. Moreover, GCCs are steadily adopting flex spaces, with approximately 5-10 per cent of flex seats currently being utilized by GCC occupiers, indicating a shift towards more agile workspace solutions,” said Arpit Mehrotra, Managing Director, Office Services, Colliers India.
US origin firms account for 71% of the total GCC demand
Since 2020, Colliers said, GCCs have leased about 72 million sqft of office space across the top 6 cities in India, accounting for 39 per cent of the total office demand during the period. US-origin GCCs, primarily belonging to tech and BFSI sectors, dominated this demand with 71 per cent share, followed by EU based GCCs. APAC based tech and engineering & manufacturing firms too have gradually started establishing their GCCs in the country, registering 8X YoY rise in 2023. This growing demand for GCCs in India, driven by availability of skilled workforce at affordable costs, real estate cost arbitrage and improving regulatory framework, is solidifying India’s position as a preferred GCC destination.
GCC demand diversifies with surge in BFSI and Engineering & manufacturing leasing activity
While the technology sector continued to dominate the overall GCC leasing activity during the 2020-23 period, BFSI and engineering & manufacturing firms saw significant traction in recent years. In 2023, the BFSI sector experienced a four-fold increase in GCC leasing activity, while the engineering & manufacturing sector saw a notable 1.6X rise compared to 2020.
Bengaluru and Hyderabad account for 60% of the total GCC demand
Bengaluru, Hyderabad, and Chennai have become key GCC hubs in India, with Bengaluru and Hyderabad together leading GCC leasing activity at a cumulative share of 60 per cent from 2020 to 2023, Coolers report stated. Chennai saw a notable 2.4X surge in 2023, while Pune and Mumbai witnessed over 1.7X growth compared to 2022.
The attractiveness of tier-I cities lies in the availability of high-quality commercial developments, strong talent pool and educational ecosystem making them ideal locations for expansionary activities of GCCs. Furthermore, comparatively low real estate and manpower cost as well as overall cost of living makes India a strong competitor in the GCC landscape.
“Sub and near dollar micro markets remain pivotal for GCC space uptake in India, contributing nearly 80 per cent of the leasing activity. With two-thirds of the demand concentrated in quality assets across SBDs of respective cities, GCC occupiers tend to give equal consideration to rental affordability and high-quality infrastructure. Occupiers particularly from sectors like engineering & manufacturing and healthcare & pharma typically favour PBDs owing to their significant lower rentals,” said Vimal Nadar, Senior Director and Head of Research, Colliers India.
Looking ahead, he added, SBDs will remain GCC epicenters for their proximity to talent pools and business hubs, while PBDs will witness increased interest, especially from non-tech sectors. Improved business sentiments and positive economic outlook is likely to drive heightened demand for office spaces including GCCs in the country.