5 factors that make Bengaluru and Hyderabad leading hubs for global capability centres

A report by real estate consultant Colliers, also found that the average transaction size with regards to GCC office leasing in Bengaluru and Hyderabad stands at 1.30 lakh square feet as opposed to 70,000 square feet in Pune, Mumbai and Delhi-NCR.

GCCs are offshore captive centres of multinationals that handle support operations such as back-office functions, IT assistance and customer relationship management, among others. Some large companies use GCCs as centres of excellence as well.

Here’s a list of the five reasons that have helped Bengaluru and Hyderabad curry favour amongst multinationals.

1 Availability of skilled tech talent

According to sectoral experts, availability of skilled talent at affordable pricing is the foremost priority for multinational corporations globally looking to set up offshore units. While India is overall an attractive proposition for these MNCs in terms of cheap labour supply, Bengaluru and Hyderabad appear to have an edge over other top cities in the country due to a firmly established IT industry.

Besides technology which commands a lead, GCCs are predominantly present in sectors such as BFSI, engineering and manufacturing, research consulting and life sciences. The emerging segments which currently have a smaller share comprise semiconductors, electric vehicles, healthcare, and so on.

Also Read: Bengaluru leads leasing by Global Capability Centres in India with 40% share between 2022 to H1 2024: Report

“It must be noted that there is a difference between Bengaluru and Hyderabad as well,” said Abhinav Joshi, Head of Research, India, Middle East and North Africa, CBRE.

It is not simply the scale but also the diversity of talent, especially at the mid and senior levels, that sets Bengaluru apart, he said. Meanwhile Hyderabad ends up attracting a lot of demand from life sciences, technology and to a certain extent BFSI, he added.

2. Supply of integrated commercial real estate

Integrated real estate in this context can be understood as large scale high quality commercial developments, including flexible workspaces, coupled with complementary offerings such as retail, F&B, play arena, relaxation or fitness centres, ESG compliance and so on. Both the cities in discussion, Bengaluru more so, offer a consistent and fitting supply of that at competitive if not advantageous pricing, experts said.

“We have a larger quantity of them in Bengaluru and to a certain extent in Hyderabad as well. Hyderabad, I would say, it is largely in the IT corridor and parts of the extended IT corridor,” Joshi said. Usually, GCCs prefer real estate which resemble what they have in their global headquarters, he added.

Also Read: Bengaluru leads office space absorption by global capability centers in India at 4.3 mn sq ft: Report

Furthermore, a Colliers report pointed out that previously averse, GCCs are increasingly opening up to flex spaces for their expansion strategies, owing to the flexibility and scalability offered by them. Statistically speaking, 5-10% of flex seats in India are currently being taken up by GCC occupiers, the report said.

During the first half of 2024, Bengaluru led the flexible workspace footprint across the top eight cities in India with a 31% contribution to the overall 58 million square feet clocked by the segment, as per Cushman & Wakefield. Meanwhile Hyderabad had a nearly 12% share.

3. Presence of a larger complementary ecosystem

The two geographies in discussion have an IT enabling environment, and large presence of startups and tech firms, experts pointed out. GCCs, after all, end up recruiting talent from the same ecosystem and it is even better when that is diverse, they said. One can say that it is also a cluster effect and first-mover advantage, said Joshi.

4. Enabling business and social environment

Experts pointed out that while the top cities in India are similarly placed in terms of favourable policies towards MNCs and offering ease of doing business to them, Karnataka has been at the forefront of enabling policies for emerging sectors such as e-vehicles, data centres and GCCs.

In fact, the tech-progressive state is set to roll out India’s maiden GCC policy soon. According to media reports, the draft policy is currently being put together and is set to be out next month.

Also Read: Bengaluru and Hyderabad account for 60% of the total Global Capability Centres demand: Colliers

Furthermore, factors such as English proficiency, moderate weather conditions and a cosmopolitan culture add to the appeal.

Talking about Hyderabad, a property consultant who did not wish to be named, lauded the city’s flexibility, agility and proactive approach in addressing infrastructural issues. “The political dispensation there has also been very friendly and welcoming towards these global corporations,” the individual added.

5. Range of rental options

Sectoral analysts highlighted that Bengaluru and Hyderabad have several secondary and peripheral markets which offer relatively cheaper rental rates for much the same quality.

“Bengaluru and Hyderabad have larger sub-dollar and near dollar micro markets with average rentals at ₹70 per square feet rate as well, which makes a bigger financial impact while setting up GCCs,” explained said Vimal Nadar, Senior Director and Head, Research, Colliers India.

According to a Colliers report, typically GCCs, which earn the majority of their revenues in US dollars, prefer having a presence in micro markets where monthly rental expense is less than or close to a dollar per square feet.

Statistics on overall GCC activity in India

“GCCs have been present in India since the early 2000s, starting in the form of KPOs (knowledge process outsourcing). From there they have upgraded and graduated to become GCCs and innovation centres in certain places,” said Nadar.

Since the turn of the century, the GCC landscape in the country has grown notably, fostering more than 1,600 centres as of 2024, according to estimates of various consultancies.

India’s offshoring market witnessed an overall leasing volume of 27.3 million square feet in the calendar year 2023 with cumulative transaction volumes from GCCs accounting for 20.8 million square feet, as per Knight Frank India.

“Over the past decade, India has transformed itself from a cost-effective centre into a value-adding captive centre,” said Viral Desai, Senior Executive Director, Occupier Strategy and Solutions, Industrial and Logistics, Capital Markets and Retail, Knight Frank India.

Going forward, Colliers anticipates 40-50 million square feet of GCC leasing activity over the next two years, contributing to about 40% of the total demand for office spaces in India.