Indian Offshoring Market Leases 46% of Office Space: Knight Frank

In the latest report from Knight Frank, Asia Pacific Horizon: Harnessing the Potential of Offshoring[2], India has been cited amongst the leading offshoring locations in the world. Indian Offshoring market has evolved itself as a significant occupier in India’s office space with leasing over 46% of office space in 2023, with GCCs being the biggest offshore occupier. India’s offshoring market witnessed an overall leasing volume of 27.3 mn sq ft (Million Square Feet) in calendar year 2023 (cumulative transaction volumes from GCC: 20.8 mn sq ft and Third-party IT services: 6.5 mn sq ft), making it a significant increase of 26% from the previous year.

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% in 2022 to 35% in 2023.

Information Technology remains the biggest GCC occupier in the country. With leasing volume of 11 mn sq ft, IT constituted 41% of total area transactions recorded in offshoring market 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

Viral Desai, Senior Executive Director, Occupier Strategy & Solutions, Industrial & Logistics, Capital Markets and Retail Agency Knight Frank India, said, “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[3]. Assuming a similar pace of growth, the number of GCCs in India may scale up to 2880 by 2034.”

Offshoring emerges as crucial catalyst for surging office demand

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.

Indian IT Service Exports

Indian IT Service Exports is expected to expand from USD 185.5 billion in 2023 to USD 230.5 billion in 2025[4]. The current pace of additional commercial assets supply will expand Indian office market stock to an estimated one billion square feet by 2025.

Knight Frank's Asia-Pacific Horizon Report: Harnessing the Potential of Offshoring, studies the essential factors that define the region's appeal as the best location for offshore services and sheds light on the significant changes in the industry. 

Within the region, these markets offer the best offshoring locations around the world

Tim Armstrong, global head of occupier strategy and solutions, Knight Frank, says “Companies today face a multitude of challenges, including cost management, sustainability and talent retention and attraction. At a time when companies worldwide are looking to increase performance, efficiency and innovation whilst also prioritising cost control, Asia-Pacific offers considerably lower operating costs, at nearly 70% less than the US, based on Knight Frank research. For every square foot of office space, occupiers can expect to save on average USD 70.86 in the four cities compared with mature markets. This translates to a staggering 54% cutback in occupancy costs annually.”