BFSI Segment Leasing Share Doubles in Bengaluru, Pune & Hyderabad

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According to Prashant Thakur, Director & Head - Research, ANAROCK Property Consultants BFSI firms are primarily attracted to IT hubs Bengaluru, Hyderabad and Pune because of their more affordable rentals and the availability of relevant talent and workforce. It is clearly a hedge against future disruptions and a bid to ensure business continuity. To say the least, COVID-19 seriously disrupted the Indian office sector in 2020. The total sector-specific office leasing activity in the three dominant IT hubs Bengaluru, Hyderabad and Pune declined by approx. 55% against the preceding year – from 62.35 mn sq. ft. in 2019 to 27.80 mn sq. ft. in 2020. However, these three cities are witnessing a significant rise in leasing activity by the non-IT/ITeS sectors like the BFSI (banking, financial services and insurance) segment. BFSI's Increasing Prominence IT/ITeS hotbed Hyderabad recorded the highest rise in BFSI segment leasing activity. Of the total gross absorption of 12.35 mn sq, ft. in 2019, BFSI comprised a 10% share. This nearly doubled to 19% of the total 5.70 mn sq. ft. space leased in 2020. Interestingly, out of the 1.02 mn sq. ft. leased in H1 2021, the share of the BFSI sector rose to 38%. Bengaluru saw a similar trends - from an 8% share in 2019 (of 42.6 mn sq. ft. gross absorption) to 15% in 2020 (of 17.8 mn sq. ft.), and 13% in H1 2021 (of 6.70 mn sq. ft.). Mumbai Metropolitan Region (MMR) – India’s most expensive real estate destination - was once the nation’s predominant BFSI hub preferred by most global and national players. Post the pandemic, many companies are adopting work-from-home and thereby optimising their operational costs. Professional Services Surge in Pune Meanwhile, many consulting companies’ delivery centres are looking at Pune to set up base in. The city offers a healthy mix of industrial and IT/ITeS real estate, with lower rental values and burgeoning infrastructure also pivotal decision drivers. The increased preference for Pune as a manufacturing hub for companies shifting out of China has been a major demand boost for the professional services segment. Out of the total 1.09 mn sq. ft. office space leased in Pune in H1 2021, nearly 13% was by the professional services sector. In both 2020 and 2019, this sector's occupancy share was approx. 7%. In 2020, gross absorption in Pune was approx. 4.4 mn sq. ft. while in 2019 it was 7.4 mn sq. ft. Future Trends Despite the above, the IT/ITeS sectors will continue to lead in terms of share of commercial office leasing in these three cities. Demand for IT/ITeS-specific office spaces in Bengaluru, Hyderabad and Pune will gain further momentum in the coming years. However, the emergence of an alternate demand driver is crucial for regaining ground lostdue to the COVID-19 pandemic. We will see these cities’ office markets see a DNA-level transformation in the post pandemic era. Image for Representational Purpose Only