GCCs Dominate India's Flex Office Market, Up 32% This Year: Knight Frank Bengaluru dominates 41 per cent of GCC focussed flex space occupancy across eight markets in India, underscoring its status as a key tech and corporate innovations hub.

Global Capability Centres (GCCs) have emerged as the primary occupiers of flex spaces across the country, according to the latest report from Knight Frank titled 'GCC – Driving India's Real Estate Growth Story'. According to the report, the number of flex seats occupied by GCCs across eight key markets increased 32 per cent from 17,380 in 2023 to 22,881 in the first nine months of 2024.

Flex space typically includes two categories of office spaces: co-working and managed office. A co-working space is a company that specialises in providing comprehensive office space solutions for other businesses along with the benefits of flexibility of tenure, extent of services provided and the ability to scale higher or lower as required is covered under this category. These flex transactions typically do not have a single anchor sub-tenant who dominates their tenant roster.

On the other hand, managed offices are differentiated from plain co-working transactions to the extent that these flex spaces are taken up to service a single sub-tenant or for an extremely large anchor.

According to Knight Frank India, a year-on-year (YoY) analysis of GCC flex seat occupancy shows a decline in usage from the year 2021 to year 2023, as companies transitioned back to traditional office spaces with the easing of the Covid-19 pandemic. However, 2024 saw a shift with flex seat occupancy by GCCs increasing once again. This resurgence is linked to slower economic growth in the US, prompting companies to leverage India's cost advantages and talent pool, boosting demand for flexible workspaces. This change highlights India's cost-efficiency and skilled workforce as key drivers in workspace decisions for global firms.

Bengaluru dominates 41 per cent of GCC focussed flex space occupancy across eight markets in India, underscoring its status as a key tech and corporate innovations hub. In contrast, Kolkata holds just 1 per cent of the flex space share, indicating a limited presence of such centres. This distribution reflects regional preferences, with Bengaluru standing out as the leading market for flex space adoption among GCCs.

Currently, GCCs occupy almost 202.6 million sq. ft. of Grade A office space across India's top six cities, with Bengaluru and Hyderabad contributing three-fourths of this leased space.

From 2018 to Q3 2024, the IT/ITeS sector has continued to dominate the GCC landscape, followed by the BFSI and Consulting sectors. GCCs still lead the chart followed by BFSI and Consulting GCCs. Mumbai leads with the highest percentage of GCCs under the BFSI sector and Bengaluru leads with the highest percentage of GCCs in the IT/ITeS sector.

Of the 1,900 GCCs in India, about 66 per cent originate from Americas, with 1,250 from the US and 30 from Canada, showcasing the region's major influence. Another 27 per cent of India's GCCs originate from the EMEA (Europe, Middle East, and Africa) region, reflecting interest from both established and emerging economies. The APAC region, though smaller contributes 7 per cent, with 44 GCCs from Japan, 25 from Singapore, and 15 from Australia.

"India's GDP growth continues to be the fastest among major economies in the world, attracting attention for its rapidly developing infrastructure and the steady influx of top-tier talent and corporate entities. This, combined with favourable factors such as a stable political climate, a large consumption-driven economy, and a strong regulatory framework in the financial sector have increasingly positioned India as a preferred destination for multinational corporations, with US companies leading the way. The cost-efficient nature of flexible workspaces has further driven a notable increase in occupancy rates among GCCs in 2024. With a thriving talent pool and competitively priced commercial assets in key markets, GCCs are well-positioned for sustained growth in the coming years," said Shishir Baijal, Chairman and Managing Director, Knight Frank India.

The growth drivers for GCCs in India extend beyond just the BFSI and technology sectors; they now encompass a variety of industries, including manufacturing. With the Indian government investing approximately 3.5 per cent of GDP in infrastructure, significant growth in the manufacturing sector is anticipated in the coming years. The Knight Frank report has highlighted few recommendations to enhance the operation and expansion of GCCs in India.

Innovative Financing Strategies
GCCs in India should consider innovative financing options to maximise tax efficiency and minimise expenses. One such effective method is the lease renting model, which allows GCCs to lease essential items, such as furniture and IT equipment, from third-party providers, thereby benefiting from dividend tax savings.

Exploring new micro markets
GCCs in India should look for new micro locations within cities that offer improved connectivity to metro lines and essential amenities necessary for the effective operation of the GCC ecosystem.

Flexibility
GCCs should also prioritise flexibility in their office space, enabling them to make necessary modifications adjustments in response to the rapidly changing business landscape.

Government policy
State governments in India should develop their own GCC policies, similar to the one introduced by Karnataka, as this would provide a clear roadmap for establishing new GCCs across various states in the country.