September 12, 2023:Foundational shifts across the banking and finance sector are presently underway, with a transformative focus on digital, workforce and Environment, Social and Governance (ESG) priorities, according to Colliers, an investment management company. Having invested significantly in technology, people and workplaces, banking and finance companies today find themselves at an inflection point, Colliers experts have highlighted.
The investment company has found physical offices having a profound impact, particularly on an organisation’s digital transformation journey.
“After a lull of 2 years, leasing by Banking, Financial services and Insurance (BFSI) sector made a major comeback and grew more than two-fold at 6.8 million sq foot (msf) in 2022. This strong streak continued in the first half 2023 with BFSI occupiers’ leasing at 3.6 msf, 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 in healthy space uptake in the short to medium term,” said Peush Jain, managing director, office services, Colliers India.
The BFSI sector has seen a steady rise in demand in the last two years, with its share in total leasing regaining 15% in H1 2023 from the pandemic lows. The resurgence in demand is fuelled by a healthy space taken up by domestic and select global banks and financial institutions, supported by a higher rate of return to office. Domestic banks, insurance companies and financial institutions have witnessed an uptick in demand backed by improved economic outlook and heightened domestic demand.
Interestingly, the majority of the large BFSI occupiers continue to prefer conventional office spaces and work mechanisms to suit their operational and technical requirements, keeping the demand for real estate space buoyant.
| Leasing by BFSI sector | |||||
| 2019 | 2020 | 2021 | 2022 | H1 2023 | |
| Gross Leasing (msf) | 6.5 | 3.0 | 3.7 | 6.8 | 3.6 |
| Share in total leasing (%) | 14% | 10% | 11% | 14% | 15% |
Source: Colliers
Note:
- Data pertains to Grade A buildings
- Gross absorption does not include lease renewals, pre-commitments and deals where only a letter of Intent has been signed.
- The top six cities include Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai and Pune.
According to the report, offices provide an absolute opportunity to ensure customer experience along with employee satisfaction and productivity, collectively contributing to overall business performance while also addressing climate action goals.
Hybrid or remote work is adding new dimensions to the location strategy, with portfolios expanding and diversifying to include ‘hub’ and digital campus-type delivery models, as more occupiers are now exploring suburban and peripheral locations. There are also massive shifts in the ways office lease transactions are done today. For instance, Colliers’ APAC research and client interactions indicate that more occupiers are exploring shorter lease terms and flexible space to drive efficiency and construct diversified portfolios that cater to different ways of working.
According to Colliers, the Asia Pacific region has possibly the most exciting 12 months ahead, globally, both in terms of money coming into Asia Pacific and Asian money looking to be deployed into other regions.
“While hybrid working prevails across most sectors, BFSI occupiers in India continue to focus on bringing employees back to the office, with over 90% rate of return to office. The preference towards traditional office spaces remains unabated, as they continue to prioritise data security and operational privacy over flexibility and lower capex. The proportion of flex component is relatively lower as compared to other prominent sectors. Going forward, the sector will continue to contribute upwards to conventional office space uptake in India, seeking new age Grade A office spaces, with increased customisation addressing their data security, EHS compliances and other technical office space requirements,” says, Vimal Nadar, senior director and head of research, Colliers India.
BFSI dominates Mumbai market during 2022-H1 2023
According to the report, Mumbai continued to drive BFSI leasing activity, grabbing one of every three deals during the last 18 months (2022-H1 2023). During this period under review, the city accounted for approximately 31% of the total leasing by the BSFI sector across the top six cities in India, with an absorption of over 3.2 msf. While Mumbai continues to attract higher BFSI demand, Bangalore has also seen a rise in space taken up by BFSI occupiers in the last four to five years, as large global BFSI occupiers are setting up their technology and back-office operations in the city owing to its huge digital talent pool & robust infrastructure. In H1 2023, Bangalore surpassed Mumbai in total BFSI leasing, accounting for 34% of the total leasing in the sector. According to the report, as digitisation remains core to financial services, BFSI players will continue to explore larger markets with presence of tech-hubs such as Bangalore, Delhi-NCR, Hyderabad, Chennai, Pune. Tier-II markets are also likely to witness heightened demand as occupiers look to setup and expand their back-office operations in these locations owing to improving infrastructure, availability of digital talent pool and favourable real estate costs.
City wise share in total leasing by BFSI sector (2022-H1 2023)
| City | Share in total BFSI leasing in last 18 months |
| Mumbai | 31% |
| Bengaluru | 24% |
| Delhi NCR | 18% |
| Chennai | 14% |
| Hyderabad | 9% |
| Pune | 4% |
Source: Colliers
See also: India’s office sector gross leasing likely to touch 40-45 msf in 2023: Report
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