Offshoring Catalyzing Office Demand

Indian offshoring market has evolved itself as a significant occupier in India’s office , marking a significant trend of offshoring gaining a big share of office space leasing.

According to a recent report by Knight Frank , India’s offshoring market  witnessed an overall leasing volume of 27.3 msf in calendar year 2023. The cumulative transaction volumes of 20.8 msf from GCC and 6.5 msf from Third party IT services, mark a significant increase of 26 percent from the previous year. Offshoring , also known as Business Processing Outsourcing (BPO), offshoring encompasses various models such as Global Capability Centres (GCCs) and Business Services.

In recent years, India’s office real estate market has seen a positive trend from GCCs, seeking growth opportunities in the global offshoring industry. The GCC landscape in India has grown significantly by fostering more than 1,580 centres across the nation in 2023. The GCC’s proposition in the Indian leasing transactions has increased from 25 percent in 2022 to 35 percent in 2023.

Though Information Technology remains the biggest GCC occupier in the country, the growth was significantly propelled by GCCs from the industrial sector, particularly in the semiconductor, automobile, and pharmaceutical industries. These GCCs secured large spaces to capitalise on unique growth opportunities and align with the momentum of these industries globally.

Source: Knight Frank Research 

“India has been a traditional leader in the outsourcing market and the meaningful policies of the government has augmented its position with a unique proposition of a high-skill, low-cost market. Over the past decade, India has transformed itself from a cost-effective centre into a value-adding captive centre. By aligning itself with evolving needs of global businesses, India is now an established centre of excellence. The growing share of Global Capability Centres (GCC) in total leases will remain supportive of office market demand in 2024.Further it is projected that GCCs will potentially drive the office market in the next decade. By 2030, there will be an estimated 2,400 GCCs across India as it emerges as a global technology and services hub. Assuming a similar pace of growth, the number of GCCs in India may scale up to 2880 by 2034, according to Viral Desai, Senior Executive Director, Occupier & Solutions, Industrial & Logistics, Capital Markets and Retail Agency, Knight Frank India”

 Global companies increasingly seek cost-effective solutions to minimise expenses, and a growing number are now looking towards offshoring functions as a strategic avenue. Offshoring has emerged as a critical driver propelling office demand in four APAC Hubs – India, Philippines, Malaysia and Vietnam.According to Tim Armstrong, Global Head of Occupier Strategy and Solutions, Knight Frank, at a time when companies worldwide are looking to increase performance, efficiency and innovation whilst also prioritising cost control, Asia Pacific including India offers considerably lower operating costs, at nearly 70 percent less than the US. For every square foot of office space, occupiers can expect to save on average USD 70.86, translating to 54 percent cutback in occupancy costs annually.

Indian IT Service Exports is expected to expand from USD 185.5 billion in 2023 to USD 230.5 billion in 2025. The current pace of additional commercial assets supply will expand Indian office market stock to an estimated one billion square feet by 2025.