Dominated by global capability centres, office leasing in the BFSI sector reaches a decadal high

The BFSI (banking, financial services, and insurance) sector has emerged as the most prominent demand driver in office leasing for the first time in a decade during the January-September 2023 period on par with the technology sector. During the period, the BFSI sector's leasing in the overall office space constituted approximately 23 per cent, inching towards 10 million sqft mark. This notable upswing was primarily driven by the robust performance of BFSI companies, supported by their multi-year low non-performing loans and sufficient capital and liquidity reserves. Well-capitalised banks further supported the rapid growth of the fintech sector, expanding the presence of e-payment service providers and the sustained expansion efforts of global BFSI majors establishing their Global Capability Centres (GCCs) in India.

These findings were revealed in the report ‘BFSI firms turbocharging Indian Office Realty' by the real estate consulting firm CBRE South Asia Private Limited. The report observed the significant growth and expansion of the BFSI office leasing, growth patterns, emerging trends, and the outlook for the sector, offering valuable insights into the evolving dynamics of the sector.

Interestingly, as per the report, the GCC leasing by BFSI firms dominated more than half of the sector’s total BFSI office leasing during the aforementioned period, with a 256 per cent Y-o-Y growth as compared to 1.6 million square feet across six cities during January-September 2022. The surge in GCC leasing by BFSI firms was led by Mumbai, accounting for 33 per cent of the GCC leasing by BFSI firms in Jan-Sep’23, followed by Bengaluru with 28 per cent and Hyderabad at 20 per cent. Large deals accounted for about 34 per cent of the BFSI GCC deals in Jan-Sep’2023. BFSI GCCs are driving digital transformation for their parent companies, including specialised services such as risk monitoring, transaction taxation, and portfolio analysis.

The report further observed that during Jan-Sep’23, leasing by global banks and investment banking firms accounted for almost 30 per cent of the BFSI sector’s leasing, led by some large deals by American firms for their GCCs. The report said global insurance firms have been expanding in India to enhance their GCC capabilities. Financial services firms are offering a plethora of services such as wealth management, loan, fund and trading services. These firms continue to account for the highest share in leasing, led by the expansion of such firms.

Among the cities, Mumbai emerged as the frontrunner and dominated BFSI office leasing with a 30 per cent share in overall BFSI office leasing across the top eight cities in India, followed by Bengaluru with a 20 per cent share, Hyderabad 15 per cent, Delhi-NCR 11 per cent and Pune 11 per cent. Leasing by BFSI firms has been strong even in prominent technology hubs such as Bengaluru and Hyderabad due to the availability of a talent pool to aid their digitisation efforts (especially banks); besides expansion by several GCCs.

The report further points out that with an average lease deal size reaching nearly 60,000 square feet the BFSI sector surpasses the average deal size across the top five sectors by approximately 47 perc ent from Jan-Sep’23. Deals exceeding 100,000 sqft, classified as large-sized, constituted approximately 13 per cent of the overall BFSI deals finalized in Jan-Sep’23, driven by heightened absorption from GCCs and domestic banks.

“The BFSI sector's resilience, coupled with the rise of digital infrastructure needs and diverse financial services, will fuel strong hiring in the coming months. Domestic banks are actively seeking skilled professionals in areas such as sales, wholesale banking, and treasury, signalling a dynamic era of growth and opportunity in the financial landscape. Additionally, global BFSI firms are poised to embrace hybrid working models, prioritizing office-based work to foster in-person collaboration, innovation, and flexibility.” remarked Anshuman Magazine, chairman and CEO - India, South-East Asia, Middle East and Africa, CBRE.

Giving an outlook for the BFSI sector and their growing requirement for office space the report anticipates robust hiring in the BFSI sector, driven by the demand for digital infrastructure management and various financial services. The report stated that the domestic banks are actively seeking professionals in areas such as sales, wholesale banking, treasury etc. The report observed that digital transformation in the BFSI sector is expected to generate significant technology-related job opportunities through big data, analytics, and cloud technology.

According to the report the BFSI workforce is emphasizing a blend of technology and financial skills, with GCCs in India evolving into second headquarters requiring a multi-generational agile workforce and cross-functional future-ready workplaces. The report said despite historical hesitancy, BFSI firms are expected to show increased interest in flexible spaces, driven by the prospects of enhanced flexibility, customized space and services, and reduced capital expenditures.