US companies top in leasing office space in India

Rashmi Pratap Mumbai | Updated on May 16, 2018

Over the next two years, almost $48 million is expected to be spent on leasing office space in India, says the report

Good infra, lower prices are the main attractions

American companies are the biggest leasers of commercial office space in India, occupying about 45 per cent of the grade ‘A’ space, as they continue to expand operations leveraging the low costs and highly-skilled resource base in the country.

“The long-term average shows that companies from the US lease 40-45 per cent of the grade ‘A’ office space in India. This is followed by domestic companies, which account for 35 per cent of the office real estate absorption,” Ashutosh Limaye, Head of Research & REIS at JLL India, told BusinessLine.

Price advantage

Companies from the European Union take the third spot with 10-15 per cent, while APAC countries and the rest of the world account for about 5 per cent. “India remains one of the top outsourcing destinations in the Asia-Pacific Region. and US corporates account for most of the office-leasing activity due to India’s inherent low costs and skilled resource base,” said Ram Chandnani, MD, Advisory & Transaction Services, India.

Some of the biggest US companies that have leased office space in India include Microsoft, IBM, Cognizant, Convergys, Bank of America, JP Morgan, Wells Fargo and Blackstone.

India’s office space compares favourably with similar facilities abroad in terms of overall infrastructure, but come with lower price tags. While prime locations such as Connaught Place (Delhi) and Bandra-Kurla Complex (Mumbai) rank among the world’s most expensive office locations, other locations come with a reasonable tag.

In Noida, the monthly rent for a grade ‘A’ IT or SEZ facility is ₹47 per sq ft and it is ₹50 per sq ft in the business districts of Thane and Navi Mumbai.

Large American firms have set up shared services centres, GIS centres and other facilities in India and their percentage has gone up over the years. According to CBRE, in 2016, Amercican corporates accounted for 39 per cent of the overall office absorption of 43 million sq ft and this went up to 45.6 per cent in 2017.

Major customers

While many companies have been outsourcing to third party firms, players in the banking and financial services industry (BFSI) have to insource work due to statutory requirements and they have set up their own centres. “The highest growth is coming from technology, BFSI and e-commerce space,” Chandnani said.

That explains why Bengaluru remains a key driver of office leasing, accounting for more than the combined share of Delhi-NCR, Mumbai and Hyderabad. In the first quarter of 2018, 25 per cent of the leased office space was taken up by technology companies, followed by BFSI firms at 24 per cent and e-commerce outfits at 15 per cent, according to CBRE.

Limaye pointed out that MNCs seek top-end infrastructure to maintain consistency across their global offices, leading to a high demand for grade ‘A’ office spaces. “The US companies also use more leased office space than domestic firms, which often own their facilities or have offices within their premises.”

Published on May 16, 2018

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