Real Estate

Robust IT sector hiring sees 2 mn sq ft office space demand

Anil Urs Bengaluru | Updated on April 19, 2021

Mumbai, Noida, capitals of southern states witness good demand

IT companies, in spite of work-from-home (WFH) declared by them due to Covid-19 pandemic in the last six months, with their robust hiring, have committed over two million square feet of office space in the western, southern and northern regions of the country.

“Due to the pandemic and WFH, the office market, though there would be surrendering or ending of office space leases, but IT companies looking at their last two quarters hiring plans have begun to commit huge spaces in Mumbai and Noida, in addition to southern states’ capitals,” Karan Singh Sodi, Regional Managing Director, JLL India, told BusinessLine.

Also read: Real estate sector attracts PE investments of $3,241 m in January-March 2021: Knight Frank India

“Other Indian IT companies too have committed to lease renewals in situations where their existing contracts were coming to an end. In fact, the companies are adding space on the whole,” he added.

Robust outsourcing

Sodi, on the office space market scene in the country, said, “The IT sector in India is witnessing an increase in business thanks to more outsourcing coming India’s way. This growth is enabling a steady outlook for commercial real estate in the country.”

Arpit Mehrotra, Managing Director, Office Services (South India) at Colliers, explained, “The office space market is driven mainly by tech (IT-BPM), engineering and manufacturing sectors. With demand likely to increase substantially for services in artificial intelligence, machine learning and robotics, we believe that technology companies will expand their office portfolio over the next three years as Indian talent is being considered favourably for high-end R&D activities.”

“About 25 million square feet (msf) of RFPs have been floated in markets of Bengaluru, Chennai, Hyderabad and Pune. This underlying office demand continues to be robust with lease sizes ranging between 0.35-1 msf floated in 1QCY21. Majority of the demand came for mature markets like Outer Ring Road in Bengaluru, Financial District, Hyderabad, Gurgaon and Pune, from companies already based in India. The requirements were a combination of growth in operations (50 per cent of demand) and consolidation in offices or shift to a futuristic location,” Juggy Marwaha, CEO of Prestige Office Ventures, said.

Implications

On implications of huge space offtake, Sodi said, “The India story from an office asset class perspective is well intact. In fact, from a mid- to long-term perspective, confidence is high and that is being demonstrated through a number of investment deals being concluded in the recent past by large private equity firms like Blackstone, Brookfield and GIC. The investment flow is towards operational Grade A office portfolio as well as development potential.”

Also read: PE investment flow to real estate more than $6.27 b in FY21

IT companies consolidating their offices to one or two centres in a city has led to savings. “Large occupiers are considering the ‘hub and spoke’ model to bring cost efficiencies across their office portfolio. This model not only allows financial prudence but also allows for improvement in employee productivity, given the demand for offices in peripheral micro-markets that are closer to the talent pool,” explained Sodi.

Published on April 19, 2021

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