According to data from Knight Frank India, Chennai has surpassed Bengaluru and Hyderabad in leasing office spaces to offshore multinational companies in 2003.
In CY2003, MNCs leased 7 million square feet of office space in Chennai, compared to 6.1 million sq. ft in Hyderabad and 5.6 million sq. ft in Bengaluru. Experts attribute this trend to high rental rates and congestion in the latter cities, prompting MNCs to explore emerging markets like Chennai.
Vivek Rathi, Knight Frank India’s national director of research, noted that leasing activity has been robust in Chennai, particularly in the global capability centre (GCC) segment, which accounted for 84 percent of the city’s leasing.
Factors such as lower commercial rentals, availability of Grade A office spaces, and supportive city infrastructure have contributed to Chennai’s appeal for leasing activities.
While Bengaluru and Hyderabad maintained strong rental markets in FY24, Chennai’s manufacturing sector, especially in electronics and automobiles, provided it with a competitive advantage.
The global IT slowdown and layoffs in Bengaluru have led to a 14 percent decrease in domestic office leasing in 2023, whereas Chennai witnessed a 92 percent growth in office leasing during the same period.
Rathi predicts that Chennai’s GCC sector will continue to attract new non-IT sectors like global banking corporations and R&D companies in CY2024, maintaining its lead in offshore leasing.
Offshore MNC demand for office spaces in India increased by 26 percent in 2023, with companies seeking cost-effective solutions. Offshoring functions have become a strategic avenue for global companies, particularly in India, the Philippines, Malaysia, and Vietnam.
Indian IT service exports are projected to reach $230.5 billion in 2025, with the offshoring industry contributing nearly 60 percent of overall service exports in 2023, according to Knight Frank India.
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