From ET Realty
Tata Consultancy Services, India’s biggest software exporter, overtook consultancy firm Deloitte in 2015 as the largest office space occupier. It occupied 1.8 million sq ft space in Mumbai during the year, while Deloitte took 1.3 million sq ft space in Hyderabad in 2014.
“Commercial real estate has witnessed an improvement in the last year and these deals are reflective of this growth. As a lot of these deals are for build-to-suit developments, they are a much-needed shot in the arm for the industry as projects are de-risked prior to commencement of construction,” says Rajat Gupta, managing director-transaction services at CBRE South Asia.
According to the property advisory firm, IT and ITeS firms accounted for 56% of the demand for office space in 2015, while other sectors such as banking and financial services, engineering and manufacturing, and e-commerce collectively contributed about 29% to the total leased space during the year.
That was the case despite the fact that IT services companies such as TCS, Infosys, Wipro and HCL are expected to struggle to reach double-digit growth, according to a recent Bloomberg poll of over 50 analysts. This will be the slowest pace of growth for these companies since the global financial crisis of 2008.
“We continue to see strong demand from IT-ITes firms that continue to grow and are looking to set up offices closer to mass transport systems to reduce commuting time,” said Amit Grover, national director-office business at DLF. DLF said it managed to find takers for its entire 8.5 lakh sq ft One Horizon Centre in Gurgaon. “We have also leased 40% of 5 lakh sq ft office space launched in Chennai recently,” said Grover.
Some of the large transactions in 2015 included Accenture alone taking 4 lakh sq ft in Hyderabad and 3.5 lakh sq ft office space in Chennai. It was followed by Qualcomm, which took 3.8 lakh sq ft in Hyderabad and Oracle, which took 4 lakh sq ft space in Bengaluru. Siemens took 3.5 lakh sq ft space in Pune.
Mike Holland, CEO of Embassy Office Parks, said companies continue to consolidate into quality property, leading to upward movement in rentals. “We are seeing very strong business since 2010-2011 and this trend is expected to continue this year too. We pre-leased over 2 m sq ft by end of 2015 alone,” said Holland.
India’s office space absorption in 2015 stood at 35 m sq ft, the second-highest figure since 2011. The demand for office space in 2011 came from occupiers taking advantage of low rents after the global financial crisis. This time, however, it was the result of companies implementing their growth plans. “This year we will also see demand for build-to-suit properties, especially from the larger IT occupiers. While the absorption in 2015 is similar to 2011, it is distributed across new and old buildings; previously it was largely in newly completed buildings,” said Anuj Puri, chairman at JLL India.