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International companies outsourcing jobs to India have become a major driver of office demand in the country with global capability centres and third-party IT service providers contributing 46 per cent to the total leasing of workspace during 2023, according to Knight Frank.
Real estate consultant Knight Frank, in its latest report 'Asia Pacific Horizon: Harnessing the Potential of Offshoring', noted that the offshoring industry in India has grown significantly into a leading global service provider, accounting for 57 per cent of the global offshoring market.
The consultant explained that the offshoring market involves companies outsourcing business processes or services to external providers located abroad, aiming to leverage cost savings, specialised skills, and operational efficiencies.
The offshoring market, also known as Business Process Outsourcing (BPO), encompasses various models such as Global Capability Centres (GCCs) and Global Business Services (GBS).
GCCs are internal units set up by companies in offshore locations, while the GBS involves centralised service delivery units providing a range of services globally.
"In 2023, India witnessed an overall leasing volume of 27.3 million square feet (sq ft) in the offshoring industry, marking a significant increase of 26 per cent compared to the previous year," the report said.
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Offshoring includes a wide range of services, including IT outsourcing, research & knowledge process outsourcing, and other service process outsourcing.
The report highlighted that India hosts about 42 per cent of the global firms that execute end-to-end business offshoring solutions from the country.
"The offshoring industry significantly contributes to the Indian economy, accounting for nearly 60 per cent of overall service exports in 2023. The industry's service exports have grown from USD 63 billion in 2013 to USD 185.5 billion in 2023 - a massive three-fold growth," it added.
The consultant said that the Indian offshoring market has evolved as a significant occupier in the country's office space with leasing of over 46 per cent of office space in 2023.
India's offshoring market witnessed an overall leasing volume of 27.3 million square feet in calendar year 2023, of which GCCs accounted for 20.8 million sq ft and third-party IT services 6.5 million sq ft.
The GCC landscape in India has grown significantly by fostering more than 1,580 centres across the nation till 2023.
The GCC's share in the Indian office space leasing transactions has increased from 25 per cent in 2022 to 35 per cent in 2023.
Though Information Technology (IT) remains the biggest GCC occupier 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.
Viral Desai, Senior Executive Director, Occupier Strategy & Solutions, Industrial & Logistics, Capital Markets and Retail Agency at Knight Frank India, said, "India has been a traditional leader in the outsourcing market and the meaningful policies of the government have augmented its position with a unique proposition of a high-skill, low-cost market."
Over the past decade, he said 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 GCC in total leases will remain supportive of office market demand in 2024," Desai said.
Further, he said 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," Desai said.
Offshoring has emerged as a critical driver propelling office demand in four Asia Pacific hubs - India, Philippines, Malaysia and Vietnam.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
