GCCs drive office space boom in India

Diverse sectors fuel demand for 72 million square feet since 2020.

Global Capability Centers (GCCs) are likely to rent 45-50 million square feet of office space over the next two years, while leasing about 72 million square feet since 2020 which accounts for over 40% of the total office space demand. 

Arpit Mehrotra, Managing Director of Office Services at Colliers India, said that GCCs have had a pronounced impact on office leasing, with technology companies having almost 45% of the total GCC leasing during the period of 2020 and 2023.

This trend signifies a broadening scope beyond traditional IT services, extending into sectors such as banking, financial services, healthcare, educational technology, and fintech.

These sectors support research and development functions and have witnessed remarkable growth, with the BFSI sector seeing a threefold increase in GCC leasing and the engineering and manufacturing sectors experiencing a 1.6 times rise compared to 2020 levels.

Mehrotra said that initially, GCCs in India were primarily focused on low-end business process outsourcing jobs. However, the landscape has dramatically changed due to India's pool of highly skilled talent professionals across finance, analytics, engineering, and operations management.

"India really boasts a large pool of highly skilled talent professionals across all the domains," he said, emphasising the competitive costs that make India a preferred location for setting up GCCs. 

The cost efficiency gained through lower real estate and manpower costs, coupled with a stable dollar rate against the Indian rupee, has maintained India's attractiveness for foreign investments.

Infrastructure quality and regulatory environment have also played crucial roles in attracting GCC expansions. Mehrotra highlighted the availability of high-quality office space, strong physical and social infrastructure, and a supportive regulatory framework as key drivers behind the growth of GCCs in India. 

"We have availability of high-quality office space with a large floor plate, well supported by improving regulatory framework," he noted, underlining the conducive business environment for GCC setups.

Micro markets, particularly those offering office spaces at less than $1 per square foot have seen significant GCC expansion. About 66% of GCC leasing from 2020 to 2023 was in Secondary Business Districts (SBDs), with major cities like Bangalore, Hyderabad, and Chennai witnessing the largest takeoff in space. 

Mehrotra pointed out, "India offers a good spread of lucrative sub-dollar and near $1 market across the SBDs," indicating a bright future for further growth in these areas.