GCCs to Drive 40% of India's Grade A Office Demand in Next 3 Years
Pune gains momentum as Bengaluru dominates most occupier sectors, while Hyderabad and Chennai also see heightened demand from flex spaces, BFSI, and engineering & manufacturing firms.
GccsIndia Office MarketGrade A Office DemandCommercial Real EstateBfsiEngineering ManufacturingReal Estate PuneSep 16, 2024
Demand from Global Capability Centers (GCCs) and domestic-origin occupiers is expected to drive expansion in the next 2-3 years. While the top 6 cities will continue to drive the contours of commercial real estate in India, newer markets, especially tier II cities, are expected to emerge as high potential growth centers.
Over the next three years (2025-27), engineering & manufacturing and BFSI occupiers are expected to lease about 11-12 million sq ft of office space each on an annual basis, up from 8-9 million sq ft each in the past 3 years. These will together account for about 40% of the total office space demand.
On the other hand, space uptake by technology firms will eventually stabilize at around 15 million sq ft as they continue to embrace hybrid and distributed working models. Additionally, flex space occupiers are likely to expand into newer geographies, accounting for 15-20% of total office leasing in the next 2-3 years.
Bengaluru dominates most occupier sectors, while Hyderabad, Chennai, and Pune gain momentum. While Bengaluru remains amongst the leading markets for Grade A office demand across sectors, cities such as Hyderabad, Chennai, and Pune are rapidly catching up and seeing heightened demand from flex spaces, BFSI, and engineering & manufacturing firms.
Some of the high performing micro markets such as SBD - Hyderabad have surpassed more prominent micro markets of Bengaluru in terms of office space take up by Technology sector. Other micro markets including OMR (Zone 1) in Chennai, Kharadi & Baner-Balewadi in Pune, and Off SBD in Hyderabad have witnessed increased traction across key demand sectors, highlighting the evolving locational preferences of occupiers.
BFSI and consulting occupiers are likely to continue prioritizing superior quality buildings in Central Business Districts (CBDs). Such occupiers are typically amenable towards paying a premium for marquee buildings with top-tier amenities in strategic locations or micro markets.
Moreover, on account of real estate footprint optimization, Engineering & manufacturing firms typically prefer having central offices in prime locations and satellite offices in peripheral areas.
On an average, rentals in micro markets preferred by leading BFSI occupiers are 44% higher than those preferred by engineering & manufacturing firms. Technology firms, meanwhile, are more evenly spread across central, suburban, and peripheral districts. On the other hand, flex operators tend to favor Secondary Business Districts (SBDs) for their strategic location, connectivity, and developed infrastructure.
Frequently Asked Questions
What is driving the growth of the Indian office market?
The growth of the Indian office market is driven by demand from Global Capability Centers (GCCs) and domestic-origin occupiers.
Which cities are expected to drive the contours of commercial real estate in India?
The top 6 cities will continue to drive the contours of commercial real estate in India, while newer markets, especially tier II cities, are expected to emerge as high potential growth centers.
What is the expected demand for office space from engineering & manufacturing and BFSI occupiers?
Engineering & manufacturing and BFSI occupiers are expected to lease about 11-12 million sq ft of office space each on an annual basis over the next three years.
Which micro markets are witnessing increased traction across key demand sectors?
Micro markets such as SBD - Hyderabad, OMR (Zone 1) in Chennai, Kharadi & Baner-Balewadi in Pune, and Off SBD in Hyderabad are witnessing increased traction across key demand sectors.
What is the preference of BFSI and consulting occupiers when it comes to office space?
BFSI and consulting occupiers are likely to continue prioritizing superior quality buildings in Central Business Districts (CBDs).
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