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Teni AbrahamAnalyst | Research | Bengaluru

+ 91 73 3865 9579teni.abraham@colliers.com

Vaishnavi BalaAssistant General Manager | Research |

Bengaluru+91 78 9904 5476

Vaishnavi.bala@colliers.com

COLLIERS FLASH INFORMATION TECHNOLOGY | OFFICE SERVICES | INDIA | 20 MAY 2 019

Colliers International foresees robust demand from Global In-house Centers (GICs), with leasing by GICs across six major cities in India to be in the range of 30-35 million sq feet (2.7-3.2 million sqmeters) between 2019 and 2021.

> While Bengaluru will likely remain the first choice for GICs, we recommend occupiers consider Hyderabad, led by its ease of doing business, talent pool and quality upcoming supply.

> We recommend the Banking, Financial services and Insurance (BFSI) sector to consider Pune for its GICs on account of cost efficiencies and talent pool.

> Mumbai and Delhi NCR should see further growth from energy, technology and electronics firms respectively.

Summary &Recommendations

INDIA: REINVENTING THE WORLD’S TECH DISCOURSE

GICs in India have undergone a tumultuous ride in India. The first GIC was set up in the late 1990s, after which their numbers increased. However, rising competition from other countries and the Global Financial Crisis led to a slowdown in expansion of GICs.

Since 2014, with about 1.0 million employees working in over 1,250 centers*, GICs in India have increasingly been undertaking high-end work like product engineering and innovation, that are critical to their organizations’ success.

As of 2019, India is the undisputed leader in the GIC market led by a change in strategy among multi-national companies (MNCs), further aided by competitively affordable rents in certain markets (that offer sub-dollar rentals), a strong IT infrastructure, tax breaks and a highly skilled, English-speaking talent pool.

A global in-house center is an office focused on delivering analytics, IT management and development, R&D and automation services to its parent enterprise.

Delhi-NCR

Bengaluru

Pune

Hyderabad

Mumbai

Chennai

› GICs leased a total of 53.0 mn sq feet (4.9 mn sq m) during 2014-2018 › In 2018, the number of large deals above 100,000 sq ft (9,293 sq m) rose 68%

to 47 over 2014 levels › Between 2014 and 2018, Mumbai saw the highest surge in leasing by GICs,

followed by Bengaluru and Hyderabad

Overview of Global in-house centers in India

% share of total leasing by GICS 2014-2018

% share of GIC employment as of 2018*

Source: Colliers International. Note: This study is based on leasing deals across Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai and Pune, excluding pure-play IT-BPM companies. *The National Association of Software and Services Companies.

What lies ahead for Global In-house Centers in India

21% 15%

9% 11%

38% 37%

11% 12%

13% 12%

8% 9%

2

COLLIERS FLASH INFORMATION TECHNOLOGY | OFFICE SERVICES | INDIA | 20 MAY 2 019

GICs: On to newer technologies

Insourcing has been prevalent in India since the late 1990s, with firms undertaking technology operations in-house instead of outsourcing them. However, the nature of work has undergone a shift, with GICs in India undertaking more strategic work. The early entrants based their decision primarily on availability of talent and lower costs, creating back-end centers, where jobs ranged from data entry to customer care. Over the last decade, global centers in India have become more critical to the success of their companies’ vision by driving product innovation and help creating value for the organization. The last five years, from 2014 onwards, have especially seen a surge in GICs for research and development, product development and the expanding use of new technology like artificial intelligence, robotic process automation and virtual reality.

Colliers International analyses key real estate trends of GICs in India and key implications for occupiers.

Over 2014-2018, occupiers leased about 53.0 million sq feet (4.9 million sqmeters) of office space in multi-tenanted buildings for their GICs. Bengaluru led the demand with about 20.1 million sq feet (1.9 million sq meters), followed by Delhi NCR and Hyderabad. Further, we found that companies from the engineering, energy and manufacturing sectors favouredBengaluru, which attracted a share of 32.0% between 2014-2018.

With technology investments imperative to future growth, we expect occupiers will continue to invest in GICs, especially to develop Centers of Excellence (CoE), as Research & Development (R&D) hubs, and innovation centers. We foresee GIC leasing to be in the range of 30-35 million sq feet (2.7-3.2 million sq meters) between 2019-2021, across the top six cities*. While we expect Bengaluru will continue to attract the highest proportion, energy and chemical companies are considering Mumbai, and tech and consumer electronics companies are looking for options in Delhi-NCR for GICs. We suggest pharmaceutical companies especially consider Hyderabad, where the government is developing a Pharma City to create a healthcare ecosystem of companies.

Pune is also a top pick for GICs for financial companies led by its proximity to Mumbai, competitive cost and diverse talent pool. We urge companies to pre-commit to space in Pune, as the vacancy rate is only 5.2% as of Q1 2019.

Shift by companies to DIY-mode gains momentum

GICs move up the value chain

*Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai, Pune.

Source: Colliers International; The above graph is based on leasing deals across Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai and Pune, excluding pure-play IT-BPM companies.

Source: Colliers International,

› Process-oriented› IT services› Business Process Outsourcing

› Analytics-oriented› Knowledge-process outsourcing› Domain expertise

› Global functions› Revenue channel› R&D, Innovation

01

02

03

Growth of GICs* , 2014-2018 (million sq feet)

2014 2015 2016 2017 2018

7.8

13.913.5

7.0

9.7

3

COLLIERS FLASH INFORMATION TECHNOLOGY | OFFICE SERVICES | INDIA | 20 MAY 2 019

Companies from the US took the lead in setting up GICs in India, accounting for a 58.0% share of total GIC leasing over 2014-2018. With almost a 30.0% share of leasing, the financial sector from the US drove demand, as it set up centers to provide strategic and market differentiating services such as treasury services and transaction processing. Examples of companies using this model include JP Morgan Chase, Morgan Stanley, Mastercard and Wells Fargo.

However, when we traced the exposure of GICs from European companies, we found that the share of leasing tapered after 2016, from an average of 46.0% over 2014-2016 to 26.0% over 2017-2018. Interestingly, among European companies, the engineering , energy and manufacturing sectors accounted for the highest proportion at 29.0% of the total leasing during 2014-2018. Siemens, Bosch, Mercedes Benz and Volvo are some notable examples.

We foresee that Japanese companies will actively seek space for GICs in India for developing technologies including the Internet of Things (IoT), artificial intelligence and data analytics, among others. Japanese companies are looking to leverage on India’s vibrant technology ecosystem, and talent that have been instrumental in the growth of US and European firms.

Japanese companies ride the future wave

Companies scouting for space for GICs, especially in the innovation, CoEs and R&D fields, typically align their workplaces to global corporate benchmarks in terms of environment, health and safety standards. Since GICs typically lease large spaces, above 100,000 sq feet (9,290 sq meters), and must adhere to these standards, we recommend they set up and/or expand their operations in the suburban and peripheral areas of major cities, as seen in the table at right. We also foresee companies building campuses in peripheral locations in major cities, and in Tier II cities like Vadodara in Gujarat, Thiruvanathapuram in Kerala, Coimbatore in Tamil Nadu, and Visakhapatnam in Andhra Pradesh. We expect availability of talent at low attrition rates, cost arbitrage, and a conducive policy environment enabled by certain state governments to drive demand by the IT industry in Tier II cities.

Suburban and peripheral locations in demand Top micro-markets picks for GICs

Source: Colliers International,

Source: Colliers International

City Preferred locations

Bengaluru Whitefield, Hebbal-Yelahanka

Chennai OMR Pre-Toll (Madhya Kailash- Perungudi)

Delhi-NCR Greater Noida, Noida Expressway

Hyderabad Gachibowli, Hitech City, Uppal

Mumbai Powai, Thane-Belapur Road, Thane

Pune Kharadi, Hinjewadi

GICs in India: top sectors and country of origin

BFSI Engineering & ManufacturingConsulting

Pharma Technology

About Colliers International Group Inc.

Colliers International (NASDAQ, TSX: CIGI) is a leading global real estate services and investment management company. With operations in 68 countries, our 14,000 enterprising people work collaboratively to provideexpert advice and services to maximize the value of property for real estate occupiers, owners and investors. For more than 20 years, our experienced leadership team, owning more than 40% of our equity, havedelivered industry-leading investment returns for shareholders. In 2018, corporate revenues were $2.8 billion ($3.3 billion including affiliates), with more than $26 billion of assets under management. For the latestnews from Colliers, visit our website or follow us on

Copyright © 2019 Colliers International

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for anyinaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

Primary Authors:

Vaishnavi BalaAssistant General Manager| Research | Bengaluru+91 78 9904 5476vaishnavi.bala@colliers.com

Teni AbrahamAnalyst | Research | Bengaluru+ 91 73 3865 9579teni.abraham@colliers.com

For further information, please contact:

Ritesh SachdevSenior Executive Director| Occupier Services | India+91 99 4569 7377Ritesh.Sachdev@colliers.com

Megha MaanSenior Associate Director | Research | India+91 96 6718 8334megha.maan@colliers.com