After a 2-year hiatus, the BFSI sector has made a robust comeback, with major global and domestic firms securing significant office space leases in the last six months.
Recent transactions include Northern Trust securing 4.7 lakh sq ft in Bangalore, HDFC acquiring 8 lakh sq. ft., and Goldman Sachs, Hyderabad leasing 3.4 lakh sq ft in the city.
The growing demand for office space is driven by domestic and some global banks and financial institutions such as JP Morgan, HDFC, Axis, and Morgan Stanley, which are expanding their presence in the country as more employees return to the office.
“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 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.
Domestic banks, insurance companies, and financial institutions have seen an increase in demand due to a better economic outlook and a stronger domestic market.
Ritesh Sachdev, senior vice president Tata Realty and Infrastructure Ltd. said that there had been significant demand and growth in the BFSI space by domestic and global players in Mumbai, Bangalore, Chennai and Pune.
“Majority of the large BFSI occupiers continue to prefer Grade A, global best-in-class assets given this suits their stringent operational & technical parameters keeping the demand for real estate space buoyant,” he said.
Mumbai remains a key destination for the BFSI sector, but Bengaluru has also witnessed a surge in BFSI occupancy over the past 4-5 years. This is primarily because major global BFSI players are establishing their technology and back-office operations in Bengaluru due to its abundant digital talent pool and strong infrastructure. In the first half of 2023, Bengaluru outpaced Mumbai in total BFSI leasing, making up 34% of the sector’s total leasing activity.
“BFSI accounts for over 20% of the overall Embassy REIT portfolio. We continue to see GCC’s sup and expand their India centres, thereby driving leasing. In particular, we are seeing strong demand from BFSI GCC’s, where there has been continued expansion by existing clients in our portfolio,” said Aravind Maiya, Chief Executive Officer of Embassy REIT.
Hybrid or remote work has also led the BFSI players to opt for flexible workspace with BFSI occupiers in India continuing to focus on bringing employees back to the office, with over 90% rate of return to office.
Going forward, the sector is expected to contribute upwards to conventional office space uptake in India, across markets like Bengaluru, Delhi-NCR, Hyderabad, Chennai, Pune.
Tier II markets are also likely to witness heightened demand as occupiers look to set up and expand their back-office operations in these locations owing to improving infrastructure, availability of digital talent pool and favourable real estate costs.
