Dominated by GCCs, BFSI office leasing reaches a decadal high in Jan-Sep’23 across 8 cities, touching 10 mn sq ft: CBRE

December 14, 2023: CBRE South Asia Pvt. Ltd, India’s leading real estate consulting firm, on Thursday announced the findings of its report ‘BFSI firms turbocharging Indian Office Realty’. The report delves into the significant growth and expansion of the BFSI (Banking, Financial Services and Insurance sector), office leasing, growth patterns, emerging trends, and the outlook for the sector, offering valuable insights into the evolving dynamics of this key industry. 

According to the report, the BFSI sector has emerged as the most prominent demand driver in office leasing for the first time in a decade during Jan-Sep’23 period, at par with technology sector. During the same period, the BFSI sector’s leasing in the overall office sector constituted approximately 23%, inching towards 10 mn. sq. ft. mark. This notable upswing was primarily driven by the robust performance of BFSI companies, supported by their multi-year low non-performing loans and sufficient capital and liquidity reserves. Well-capitalized banks further supported the rapid growth of the fintech sector, expanding presence of e-payment service providers and the sustained expansion efforts of global BFSI majors establishing their Global Capability Centres (GCCs) in India. 

Global Capability Centre (GCC) leasing by BFSI firms dominated more than half of the sector’s total BFSI office leasing during Jan-Sep’23 with 5.7 mn. sq. ft., a 256% Y-o-Y growth as compared to 1.6 mn. sq. ft. across 6 cities during Jan-Sep’22. The surge in GCC leasing by BFSI firms was spearheaded by Mumbai, accounting for 33% of the GCC leasing by BFSI firms in Jan-Sep’23, followed by Bangalore with 28% and Hyderabad at 20%. Large deals accounted for about 34% of the BFSI GCC deals in Jan-Sep’2023. BFSI GCCs are driving digital transformation for their parent companies, including specialised services such as risk monitoring, transaction taxation, and portfolio analysis. 

The report further underscores that during Jan-Sep’23, leasing by global banks and investment banking firms accounted for almost 30% of the BFSI sector’s leasing, led by some large deals by American firms for their GCCs. Global insurance firms have been expanding in India to enhance their GCC capabilities. Financial services firms are offering a plethora of services such as wealth management, loan, fund and trading services. These firms continue to account for the highest share in leasing, led by the expansion of such firms.

Among the cities, Mumbai emerged as the frontrunner and dominated BFSI office leasing with a 30% share in overall BFSI office leasing across the top 8 cities in India, with 9.8 mn. sq. ft. in 2018-Sep’23, followed by Bangalore with a 20% share, Hyderabad (15%), Delhi-NCR (11%) and Pune (11%). Leasing by BFSI firms has been strong even in prominent tech hubs such as Bangalore and Hyderabad due to the availability of a talent pool to aid their digitization efforts (especially banks); besides expansion by several GCCs.

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With an average lease deal size reaching nearly 60,000 sq. ft., the BFSI sector surpasses the average deal size across the top five sectors by approximately 47% from Jan-Sep’23. Deals exceeding 100,000 sq. ft., classified as large-sized, constituted approximately 13% of the overall BFSI deals finalized in Jan-Sep’23, driven by heightened absorption from GCCs and domestic banks. 

Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE, said, “In light of the BFSI sector’s robust performance and significant leasing impact, the way forward is promising. The sector’s resilience, coupled with the rise of digital infrastructure needs and diverse financial services, will fuel strong hiring in the coming months. Domestic banks are actively seeking skilled professionals in areas such as sales, wholesale banking, and treasury, signalling a dynamic era of growth and opportunity in the financial landscape. Additionally, global BFSI firms are poised to embrace hybrid working models, prioritizing office-based work to foster in-person collaboration, innovation, and flexibility.”

Ram Chandnani, Managing Director, Advisory & Transactions Services, CBRE India, said, “As the BFSI workforce increasingly values the fusion of technology and financial skills, the evolution of GCCs in India into second headquarters calls for a multi-generational agile workforce. This dynamic workforce seeks cross-functional, future-ready workplaces that serve as hubs for collaborative synergies and creative problem-solving. Although the BFSI sector has historically been cautious in adopting flexible spaces, we anticipate a notable shift in this trend. The allure of enhanced flexibility, tailored spaces, and services, along with reduced capital expenditures, is poised to drive increased activity in embracing flexible working arrangements within the sector.”

Outlook for BFSI sector:

• Anticipating robust hiring in the BFSI sector, driven by the demand for digital infrastructure management and various financial services.
• Domestic banks actively seeking professionals in areas such as sales, wholesale banking, treasury, and more.
• Digital transformation in the BFSI sector is expected to generate significant technology-related job opportunities through big data, analytics, and cloud technology.
• The BFSI workforce is emphasizing a blend of technology and financial skills, with GCCs in India evolving into second headquarters requiring a multi-generational agile workforce and cross-functional future-ready workplaces.
• Global BFSI firms are poised to adopt hybrid working models, emphasizing office-based work to balance in-person collaboration, innovation, and flexibility.
• Both global and domestic banking firms show a preference for office-based work due to compliance and data security regulations.
• Despite historical hesitancy, BFSI firms are expected to show increased interest in flexible spaces, driven by the prospects of enhanced flexibility, customized space and services, and reduced capital expenditures.

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