South India's Office Market on a Growth Spurt Driven by IT and GCCs
The southern cities of Bengaluru
Real EstateOffice MarketSouth IndiaGccsIt SectorReal Estate NewsMay 26, 2024
The tech sector is robust in these cities, with GCCs significantly driving office leasing activities, especially in Bengaluru and Hyderabad. In Kerala, Kochi and Thiruvananthapuram are emerging as two of the fastest-growing cities in India's Tier II league.
New GCCs set up in India, both greenfield and expansion by existing MNC occupiers, touched a record high in 2023. The three south India cities cumulatively accounted for about 74% of space leased for new GCC centers, led by Bengaluru and Hyderabad.
Within Embassy REIT's portfolio, its Bengaluru assets are at an occupancy rate of over 90%. Its entire development pipeline of 6.1 million sq. ft. — at an investment of Rs 3,800 crore — is concentrated in this city.
WeWork India, headquartered in Bengaluru, predicts significant growth in the southern market due to increased occupancy in GCCs. According to WeWork India, Bengaluru, Hyderabad, and Chennai are becoming prime choices for GCCs, representing 60% of entries into India over 12-15 months.
Concorde attributes the strong real estate growth in South India to economic expansion, infrastructure, and thriving auto manufacturing and IT sectors. The group is investing Rs 225 crore to launch 2 million sq. ft. of Grade A workspaces by 2025, addressing a strong post-pandemic demand in Bengaluru.
Puravankara said the GCCs, engineering companies, and startups are expanding their current operations and looking for assets with the highest levels of ESG metrics. The southern market contributes about 60% of India's business with Bengaluru being the largest market.
Mumbai's Mindspace Business Parks REIT forecasts vigorous growth in South India's commercial real estate market, notably Hyderabad, fuelled by demand from GCCs. At Mindspace Madhapur, 57% of leasable space is occupied by GCCs, with rising interest from domestic sectors.
For RMZ, South India continues to be an important part of its overall expansion strategy. The assets in Bengaluru, Hyderabad, and Chennai have witnessed significant interest and leasing.
Embassy REIT is a leading real estate investment trust in India, with a portfolio of commercial properties across the country. WeWork India is a leading provider of flexible workspace solutions in India, with a strong presence in Bengaluru and Hyderabad. Concorde, Puravankara, and Mindspace Business Parks REIT are leading real estate players in India, with a significant presence in South India. RMZ is a leading real estate developer and manager in India, with a strong focus on commercial properties.
JLL is a leading real estate consultant, providing research and advisory services to clients across the globe. Cushman & Wakefield is a leading real estate services firm, providing a range of services including research, advisory, and transaction management.
Frequently Asked Questions
What is driving the growth of the office market in South India?
The growth of the office market in South India is driven by the IT sector and global capability centers (GCCs)
Which cities are leading the growth of the office market in South India?
Bengaluru Hyderabad and Chennai are leading the growth of the office market in South India
What is the share of southern cities in India's annual net absorption?
The combined share of southern cities in India's annual net absorption remains between 54-56% in 2022 and 2023
What is the forecast for the office market in South India?
The office market in South India is expected to continue growing driven by demand from GCCs and the IT sector
Which companies are leading the growth of the office market in South India?
Companies such as Embassy REIT WeWork India Concorde Puravankara and Mindspace Business Parks REIT are leading the growth of the office market in South India
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