As large office space occupiers are stepping up their leasing activity in India, landlords are expecting an uptick in demand in the first quarter of calendar 2024.

Global Investment Centres and Global Captive Centres (GCCs) are looking at India actively again.

Vinod Rohira, CEO, Mindspace Business Parks REIT, said that there is a spike in physical occupancies as the companies are calling employees back to offices. According to Rohira, there would be more buyers looking for large spaces in the first quarter of next calendar year

Echoing his views, Embassy Office Parks REIT’s CEO Aravind Maiya said that growth in GCCs has been driving the demand.

For Embassy REIT, of the 1.1 million square feet of total area leased in Q1, GCCs accounted for 71 per cent. They spanned multiple sectors such as research, consulting, analytics, engineering, and manufacturing. GCCs account for 55 per cent of its gross leased portfolio. This has offset the weakness in demand from IT and IT-enabled services companies whose share in the portfolio has dipped to 14 per cent. The REIT also signed a couple of large deals in the quarter. Its 2 msf of leasing pipeline is also dominated by GCCs.

“The pipeline is significantly coming from GCCs. It’s a combination of existing GCCs who want to expand - some of them significantly - and a few new companies who have entered India,” he said.

Also read: Embassy REIT targets 20% y-o-y increase in leasing for FY24

Over the last 4-5 years, hiring by global technology companies had not translated into taking up of space. According to Maiya, only 27 per cent of the hiring has translated into take-up of office space.

The Covid pandemic outbreak led to work-from-home and drop in demand for large offices; this was followed by shrunken budgets for office space due to the recent slowdown in the US and European economies.

However, now with Covid no longer the threat that it was, employers are insisting on their employees getting back to offices in full strength.

“The minute they unfreeze capex, they will be back in the market looking for space,” Rohira said.

Maiya said that majority of the occupiers at Embassy REIT’s Special Economic Zones are GCCs, despite lack of clarity on these zones.

Even if the regulations are delayed, there is a high probability of more SEZ space being taken up by GCCs, particularly in Bengaluru, he added.

There will be an estimated 1,600 GCCs in India at the end of 2023. This is expected to rise to 2,400 by 2030, according to Nasscom. About 30 per cent of the GCCs are concentrated in Bengaluru, which attracts a third of all tech talent in India.

According to Knight Frank, firms such as D E Shaw and Burns & McDonnell started their GCC operations from Bengaluru during the first half of 2023, while the existing occupiers such as Deloitte, Mercedes and Novonordisk expanded their bases.

Both Embassy REIT and Mindspace REIT have seen stable occupancies in the June quarter, while maintaining a decent lease spread, an indication of the demand for office space.