GCCs gobble up 29% office leases this year

At a time when the Indian IT services sector is talking about optimising workforce, often giving up office space, Global Capability Centres (GCC) of multinational firms continue to move tech work to India. The year 2024 has started with a bang, commanding a share of as much as 29% of total office space leased in India so far. During the January-March 2024 quarter, nearly 4.2 million square feet was leased to GCCs across India with E&M (Engineering and Manufacturing) and automobile firms leading the way.

According to real estate consulting firm CBRE, during the Covid-19 pandemic and post-pandemic — between 2020 and 2022 — GCCs accounted for 38-43% of the total leasing with nearly 1,580 companies operating in the space. While FY23 saw GCC segment take up around 19.2 mn sq ft space, in FY24 the number rose by 17% year-on-year to 22.5 mn sq. ft. In FY24, primarily driven by key sectors such as expansion of companies operating in the Engineering and Manufacturing, BFSI and technology sectors. Between Jan-Mar of 2024, Benagluru accounted for 2.5 mn sq ft or 60% of the total space taken up in the quarter followed by Hyderabad at 1 mn sqft plus and Delhi NCR at 378K sq. ft. Anshuman Magazine, chairman and CEO - India, South-East Asia, Middle East & Africa, CBRE, says there are enough indicators that point towards the GCC leasing in India to touch around 40-45 million square feet between 2024 and 2025.

This optimism also seems to be shared by office space providers. For instance, in its latest earnings call, Embassy REIT CEO Aravind Maiya said that in FY24 it leased a total of 8.1 million square feet exceeding the original  guidance of 6 million square feet, signing nearly 99 deals for the year which included 4.4 million square feet of new leases and 1.3 million square feet of renewals and 2.4 million square feet of pre-commitments. "GCCs contributed to over 65% of this total leasing, with the demand primarily driven by Technology, BFSI, Retail and Healthcare sectors. With 8 new GCC entrants this year, we now have 86 GCCs in our occupier roster of 255 corporate," he said . Similarly Brookfield India REIT is also bullish on the GCC capacity addition in coming years. The company in its earning call also said that with having a high proportion of SEZ spaces in its  portfolio, the latest SEZ reforms will help such players to convert their SEZ spaces to non-processing areas to tap into the GCC opportunity. "We are progressing well on our plan on conversion of SEZ spaces to non-processing areas and are seeing a strong interest from occupiers for leasing such converted spaces," said Alok Aggarwal  CEO & MD, Brookprop Managment Services.

With the GCC expansion story expected to be intact, CBRE predicts that by next year the number of operational GCCs will expand by 20% and leasing activity reaching 40-45 million sq. ft. between 2024 and 2025. The need for bigger campuses, quality infrastructure and amenities becoming major checkpoints, sectors like life sciences, automobiles and aviation could also join the expansion wave.