In India, leasing by BFSI players surge two-fold at about 7 million sq feet since 2020- Colliers

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Leading the Charge: KPMG in India and Colliers’ Report on 'Sustainable real estate' showcases how sustainable real estate practices are transforming the industry
Leading the Charge: KPMG in India and Colliers’ Report on 'Sustainable real estate' showcases how sustainable real estate practices are transforming the industry

BFSI leasing bounced back in 2022 at 6.8 million square feet, surpassing pre-pandemic levels.

The share of BFSI in total leasing rose back to 15% in H1 2023, led by higher domestic demand.

Mumbai led the leasing market at 31%, followed by Bengaluru at 24%.

GURGAON, 12 September, 2023: Foundational shifts across the banking and finance sector are presently underway, with a transformative focus on digital, workforce, and environment, social, and governance (ESG) priorities, according to Colliers. Having invested significantly in technology, people, and workplaces, banking and finance companies today find themselves at an inflection point, as Colliers experts have highlighted.

Today, as banks and financial services firms rethink their future with artificial intelligence and next-gen technologies, integrating a diverse workforce with new ways of working, real estate plays a massive role in influencing positive business outcomes. It holds the key to powering the industry’s digital, workforce, and ESG goals.

Colliers has found that physical offices have a profound impact, particularly on an organisation’s digital transformation journey.

“After a lull of two years, leasing in the banking, financial services, and insurance (BFSI) sector made a major comeback and grew more than twofold to 6.8 million square feet in 2022. This strong streak continued in the first half of 2023, with BFSI occupiers’ leasing at 3.6 million square feet, rising 14% annually, demonstrating a healthy outlook for the sector in 2023. A greater focus on return to office coupled with an improved domestic financial sector outlook will further support healthy space uptake in the short to medium term.” said Peush Jain, Managing Director, Office Services, Colliers India.

The BFSI sector has seen a steady rise in demand in the last 2 years, with its share in total leasing regaining 15% in H1 2023 from the pandemic lows. The resurgence in demand is fuelled by a healthy space take-up by domestic and select global banks and financial institutions, supported by a higher rate of return to office. Domestic banks, insurance companies, and financial institutions have witnessed an uptick in demand backed by an improved economic outlook and heightened domestic demand.

Interestingly, the majority of large BFSI occupiers continue to prefer conventional office spaces and work mechanisms to suit their operational and technical requirements, keeping the demand for real estate space buoyant.

Leasing by BFSI sector

  2019 2020 2021 2022 H1 2023
Gross Leasing (msf) 6.5 3.0 3.7 6.8 3.6
Share in total leasing (%) 14% 10% 11% 14% 15%

Source: Colliers

Note- Data pertains to Grade A buildings

Gross absorption: does not include lease renewals, pre-commitments and deals where only a letter of Intent has been signed.

Top 6 cities include Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai, and Pune

Offices provide an absolute opportunity to ensure customer experience along with employee satisfaction and productivity, collectively contributing to overall business performance while also addressing climate action goals.

Hybrid or remote work is adding new dimensions to the location strategy, with portfolios expanding and diversifying to include ‘hub’ and digital campus-type delivery models as more occupiers are now exploring suburban and peripheral locations. There are also massive shifts in the way office lease transactions are done today. For instance, Colliers’ APAC research and client interactions indicate that more occupiers are exploring shorter lease terms and flexible space to drive efficiency and construct diversified portfolios that cater to different ways of working.

According to Colliers, the Asia-Pacific region has possibly the most exciting 12 months ahead globally, both in terms of money coming into Asia-Pacific and Asian money looking to be deployed into other regions.

“While hybrid working prevails across most sectors, BFSI occupiers in India continue to focus on bringing employees back to the office, with an over 90% rate of return to the office. The preference for traditional office spaces remains unabated, as they continue to prioritise data security and operational privacy over flexibility and lower capex. The proportion of flex components is relatively lower as compared to other prominent sectors. Going forward, the sector will continue to contribute upwards to conventional office space uptake in India, seeking new-age Grade A office spaces with increased customization addressing their data security, EHS compliances, and other technical office space requirements.” says Vimal Nadar, Senior Director & Head of Research, Colliers India.

In India, Mumbai dominates BFSI leasing during 2022–H1 2023, while Bengaluru sees increased traction.

Mumbai continued to drive BFSI leasing activity, grabbing one of every three deals during the last 18 months (2022–H1 2023). During this period under review, the city accounted for approximately 31% of the total leasing by the BSFI sector across the top six cities in India, with an absorption of over 3.2 million square feet. While Mumbai continues to attract higher BFSI demand, Bengaluru has also seen a rise in space taken up by BFSI occupiers in the last 4-5 years, as large global BFSI occupiers are setting up their technology and back-office operations in the city owing to its huge digital talent pool & robust infrastructure. In H1 2023, Bengaluru surpassed Mumbai in total BFSI leasing, accounting for 34% of the total leasing in the sector. As digitization remains core to financial services, BFSI players will continue to explore larger markets with the presence of tech hubs such as Bengaluru, Delhi-NCR, Hyderabad, Chennai, and Pune. Tier II markets are also likely to witness heightened demand as occupiers look to setup and expand their back-office operations in these locations owing to improving infrastructure, the availability of a digital talent pool, and favourable real estate costs.

City wise share in total leasing by BFSI sector (2022-H1 2023)

City Share in total BFSI leasing in last 18 months
Bengaluru 24%
Chennai 14%
Delhi NCR 18%
Hyderabad 9%
Mumbai 31%
Pune 4%

Source: Colliers

Note- Data pertains to Grade A buildings

Gross absorption: does not include lease renewals, pre-commitments and deals where only a letter of Intent has been signed.

Top 6 cities include Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai, and Pune

To know more about the APAC BFSI trends in leasing, check out our Expert Talks page.

Also readIndia’s data center sector is experiencing vigorous growth due to digitization, says Mohammed Atif, Director, Business Development India, Park Place Technologies

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