Office Leasing Sees the Return of Large Deals in Top Cities, Thanks to Tech & BFSI Players

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With over 30m sq ft transactions, leasing activity, mostly by GCCs, rises 24% in 2023: Colliers report

Bengaluru: The Indian office market has witnessed are bound in large deals, with over 30 million square feet of office leasing trans- actions exceeding 100,000 square feet, marking a 24% annual growth in 2023 across the country’s top six cities, according to Colliers research. GCCs (global capability centres), particularly in the technology and BFSI sectors, have been responsible for almost 40% of the significant deals in the top six cities.

Notable transactions include companies like Bank of America, Philips, Wells Fargo, Qualcomm, and Citi Bank, concentrated in major southern cities like Banga- lore and Chennai.

“The Indian office market not only navigated initial uncertainties but exceeded expectations and emerged successfully, recording an impressive 58 million sq ft of gross absorption during 2023. The demand momentum, particularly during the last quarter, will pave the way for an optimistic start to 2024,” said Arpit Mehrotra, managing director, head of office services, Colliers India. GCCs typically have large space requirements, and they, too, resumed their expansionary activities with greater fervour towards the second half of 2023, especially in the fourth quarter. By 2025, it is estimated that there will be 1,900 total operational GCCs in the country, up from the existing 1,580. “Large talent pools, cost-effective rentals, adequate Grade A developments, and a favourable office market ecosystem will continue to up- hold India’s vantage positioning from a capability centre perspective. India’s low RE costs and the vast talent pool, along with rising digital spending and cost measures, are likely to hold weight as the hub of GCC too,” said Juggy Marwaha, CEO, Prestige Office Ventures.

In the last quarter of the year, the top six cities have witnessed the highest-ever demand for office spaces in India, with all three southern cities of Bengaluru, Chennai, and Hyderabad registering the best performance since the Covid-19 pandemic.

The sectoral contributions from BFSI and engineering and manufacturing sectors have almost doubled, increasing from 10-12% in 2020 to around 16-20% in 2023.

“The GCC industry has evolved to devise new technology plus business capabilities to provide complex top-of-the-pyramid innovations, building value back to the parent. Currently, witnessing the 7th wave of innovation, GCCs to- day are more than just back-offices for their headquarters; they are developing as key centres of development, growth, and business success,” said Thirumal Govindraj, CEO of RMZ Office.

Demand from flex operators remained unabated; at 8.7 million sq ft, flex space uptake in 2023 was 24% higher compared to 2022. Flex penetration in office market is expес- ted to rise in 2024. “Increased preference for combination of core and flex real estate space, heightened activity in tier-II markets, and next- gen offices with more sustainable elements will be key themes for office markets in 2024,” said Mehrotra.