India’s office market enters the next growth phase

India’s robust tech ecosystem and large untapped economic potential are propelling the office market to the next growth phase.

January 19, 2024

India's office market has witnessed remarkable growth, with occupied office stock skyrocketing by 62% between January 2015 and September 2023. Importantly, the office market made a solid recovery in 2022 as net absorption surpassed the four-year average (2016-2019) before the pandemic. It was the second-highest annual net absorption recorded between 2015 and 2022, trailing the historic level witnessed in 2019. Moreover, net absorption in 2023 is expected to close at similar levels.

Figure 1: Growth in occupied Grade A office stock (2015 – Sep 2013)

Source: JLL Research, Q3 2023

This growth has been fuelled primarily by multinational corporations setting up their Global Capability Centres (GCCs). In fact, India has become the preferred destination for setting up GCCs. From 2018 to September 2023, these centres accounted for a remarkable 41% of the overall office leasing activity. As India solidifies its position as the offshoring capital of the world, it begs the question of whether this growth can be sustained and drive the market into the next phase.

Figure 2: Contribution to India's GCC footprint based on occupied office stock

Source: JLL Research, Q3 2023

  • To answer this question, we first look at what India has to offer – unmatched economic resilience and an increasingly business-friendly environment. Combine it with the massive infrastructure push, a vast pool of skilled, cost-effective talent, and quality real estate at affordable rates, and we have the recipe for an ecosystem that's primed for growth.

  • Second, the growth opportunity for GCCs in India is immense. Surprisingly, 72% of the Global 500 companies are yet to leverage this opportunity, leaving tremendous room for future growth.

  • Third, the demand from these global corporations is increasing. The perception of India has evolved from being just a cost arbitrage destination to a skill arbitrage hub. GCCs in India have moved up the value chain and now perform high-value work, the type that is that is largely insulated against artificial intelligence/machine learning trends. They act as transformation hubs, managing critical business operations with a focus on both business and technology aspects. As GCCs continue to evolve, their blueprint is being redrawn, and India is at the forefront of this paradigm shift. And in this next phase, India is well-poised to be recognised for its leadership arbitrage.

These elements have resulted in the creation of the perfect growth tide for India’s office market. Looking ahead, it is estimated that the number of GCC units will surpass 2,500 over the next four years, with the corresponding footprint projected to surpass 300 mn sq ft. This will undoubtedly propel India’s office market into the next phase of growth.

With a favourable ecosystem and large untapped potential, the future of India’s office market looks promising. The combination of economic resilience, evolving perceptions, and growing demand from global corporations position India as a frontrunner for sustainable growth. As more companies leverage India's growth-oriented ecosystem and existing ones execute expansion plans, India's office market is well-poised for continued success.