In the first quarter of 2023, the office real estate market witnessed an unprecedented surge, with total transactions reaching 28.2 million square feet, according to a recent report by Knight Frank. This remarkable growth highlights a significant rebound in demand, particularly from Global Capability Centres (GCCs), which dominated the market by accounting for 44% of the overall transaction volume.

GCCs Drive Office Space Demand

The GCC sector emerged as the primary driver of office space consumption, reflecting a growing confidence in India’s status as a long-term investment hub. Shishir Baijal, the Chairman and Managing Director of Knight Frank India, emphasized that the demand from GCCs is setting new benchmarks, bolstered by the global market’s positive outlook towards India.

• 12.4 million sq ft of office space was attributed to GCCs during this period.
• The IT services sector, particularly third-party IT firms, also played a vital role, contributing 5.5 million sq ft, which represents a 19% share of the office market.

Positive Outlook for the Office Space Sector

Despite some supply constraints, Baijal indicates that the office market is in a strong position and is likely to sustain its growth momentum through 2025. He pointed out that the sector is largely insulated from external challenges, including tariff-related developments. Viral Desai, a Senior Executive Director at Knight Frank, echoed this sentiment, highlighting that the cost of establishing operations in India remains significantly lower—about one-fifth of expenses in other regions.

Key Growth Drivers

Several factors are contributing to this robust demand for office space:

• The normalization of work environments and a gradual return to traditional office settings.
• The advantages of operating in India, where cost efficiency and high-quality talent are increasingly attractive to businesses.
• An AI-driven landscape that is drawing more companies to establish a presence in India.

Market Performance and Predictions

The reported 74% year-on-year increase in transaction volumes is a clear indicator of the market’s resilience. Bengaluru emerged as a standout performer, capturing approximately 65% of all GCC-related transactions. The city recorded a staggering 259% growth, culminating in 12.7 million sq ft of transactions.

Looking ahead, Knight Frank India forecasts a continued growth trajectory for the office space sector, projecting an increase of 5-6% in 2025, targeting a total of 75-78 million square feet in transactions.

As the office market evolves, the combination of competitive costs and a favorable business environment positions India as an attractive destination for global enterprises seeking to expand their footprint.