Why Bengaluru and Hyderabad are Emerging as Powerhouses for Global Capability Centres

Imagine two cities standing tall as the leaders in office leasing for Global Capability Centres (GCCs) in India. Well, it’s happening—Bengaluru and Hyderabad have risen to the top, accounting for over 60% of GCC office leasing in India between 2022 and the first half of 2024, according to a report by CBRE. But what is it about these two cities that makes them so attractive to multinationals looking to set up their offshore operations? Let’s dive into the five key factors that have helped Bengaluru and Hyderabad emerge as top destinations for Global Capability Centres.

1. A Rich Pool of Skilled Tech Talent

For multinationals looking to establish offshore units, skilled talent at competitive costs is crucial. India, as a whole, is an attractive option due to its vast and affordable labor force, but Bengaluru and Hyderabad have a special edge. Both cities boast a well-established tech industry, but it’s not just about tech—GCCs across various sectors like BFSI, engineering, manufacturing, and life sciences are finding top-tier talent here.

Bengaluru, in particular, is known for the diversity of its talent, especially at the mid and senior levels. Abhinav Joshi, Head of Research, India, Middle East, and North Africa at CBRE, explains that Bengaluru’s advantage lies in the scale and depth of its talent pool. Meanwhile, Hyderabad is becoming a hotspot for sectors like life sciences and technology, attracting a growing number of multinationals.

2. Availability of Integrated Commercial Real Estate

Another factor that sets Bengaluru and Hyderabad apart is the availability of large-scale, high-quality commercial real estate. These cities offer integrated developments that go beyond traditional office spaces, including flexible workspaces, retail, dining, fitness centers, and more. It’s all about creating environments that resemble the global headquarters of these multinational companies.

Bengaluru leads the way with a more significant number of integrated commercial properties, but Hyderabad’s IT corridor is catching up. According to Joshi, GCCs tend to prefer real estate that mirrors their headquarters, and both cities provide competitive options. Moreover, a Colliers report shows that GCCs are increasingly embracing flexible workspaces, with 5-10% of flex seats in India being taken up by GCCs.

3. A Thriving Ecosystem of Startups and Tech Firms

Bengaluru and Hyderabad also benefit from a thriving ecosystem of startups and tech companies. GCCs often recruit talent from the same ecosystem, so the presence of complementary businesses only strengthens the appeal of these cities. It’s what experts call a cluster effect—once these cities became known for their tech environments, it created a first-mover advantage that continues to draw more companies and talent.

Both cities are well-positioned to support the growth of GCCs, with ample infrastructure and an ecosystem that fosters innovation and collaboration.

4. A Business-Friendly Environment

Bengaluru and Hyderabad have a lot going for them in terms of enabling policies and a supportive business environment. Karnataka, for example, has led the way with progressive policies for emerging sectors like electric vehicles and data centers. The state is even planning to roll out India’s first GCC-specific policy, demonstrating its commitment to attracting multinational corporations.

Hyderabad, on the other hand, has earned praise for its flexibility and proactive approach in addressing infrastructural issues. A local property consultant pointed out that the city’s political climate has been welcoming to global corporations, offering a friendly and agile environment for business expansion.

5. Competitive Rental Options

One of the major financial advantages of setting up GCCs in Bengaluru and Hyderabad is the availability of affordable rental options. Both cities offer peripheral and secondary markets where rental rates are much lower compared to prime locations in other cities like Mumbai and Delhi-NCR. In some micro-markets, average rentals are as low as ₹70 per square foot, making a significant financial impact for GCCs, which earn most of their revenues in US dollars.

Sectoral analysts like Vimal Nadar, Senior Director at Colliers India, explain that GCCs are drawn to these sub-dollar rental markets, where the monthly rental expense remains close to a dollar per square foot, providing cost efficiency for these multinationals.

A Bright Future for GCCs in India

The GCC landscape in India has grown dramatically since the early 2000s, evolving from Knowledge Process Outsourcing (KPO) units into innovation hubs for multinationals. As of 2024, India is home to over 1,600 GCCs, and the demand continues to grow.

India’s offshoring market saw an overall leasing volume of 27.3 million square feet in 2023, with GCCs accounting for 20.8 million square feet of that total, according to estimates from Knight Frank. Over the next two years, experts predict 40-50 million square feet of GCC leasing activity, contributing around 40% to India’s total demand for office space.

With Bengaluru and Hyderabad leading the charge, India is set to remain a global hub for capability centers, driving both economic growth and innovation.