Global IT firms hunt for properties in Indian cities to expand business

Multinational information technology companies are on a property hunting spree across major Indian cities as they expand offices and hire more people to run them. The brisk investment flow has come as a blessing for the real estate sector, which has been struggling with falling sales and rising inventories for the last two years.

About a dozen big-ticket lease agreements have been signed by these companies in the past few months. These include the one locked by Oracle for 400,000 square feet of commercial space in Hyderabad.

SAP Labs, CISCO, Accenture and Dell are the other IT/ITeS majors that have either acquired or are in the process of acquiring large office spaces to accommodate their anticipated headcount growth.

“The office market is expected to remain attractive for occupiers with steady increase in absorption after a trend of decline in 2013,” said Sanjay Dutt, executive managing director for South Asia at realty consultant Cushman & Wakefield. “Commercial real estate rental has been low and cost of acquiring office space has become very attractive.”

German-headquartered SAP Labs has picked up over 200,000 sq ft office space in RMZ Ecoworld on the Outer Ring Road in Bangalore. This is in addition to the 400,000 sq ft that it is building to expand its campus in Bangalore.

Following suit is Oracle, which is renting 400,000 sq ft to expand operations in Hyderabad and Amazon, which has added 645,000 sq ft in SP Info City in Chennai.

“The country has witnessed an absorption of over 25 million sq ft of commercial office space year-todate. This demand is mainly from existing occupiers with the IT/ITeS and financial firms leading the absorption trend and Bangalore leading at over 7 million sq ft,” said Ram Chandnani, deputy managing director at CBRE South Asia.

As a general rule of thumb, companies provide 75-80 sq ft of space per employee.

Other IT/ITeS companies that have bought space recently include Adobe and Accenture. While Adobe has bought 250,000 sq ft in Bangalore’s Prestige Tech Platina, Accenture has acquired 400,000 sq ft of office space on the city’s Hosur Road.

Global IT services and software firms are facing two major challenges — heightened competition and rapidly changing technology environment.

Companies are trying to increase their research and development strength and shift more and more high-value R&D work to their India centers. According to Nasscom, the IT export market is set to grow by 12-14% in the current fiscal.

“Large MNCs have been quietly adding up headcount in India and bringing more work offshore,” said Kamal Karanth, managing director at staffing firm Kelly Services India. “Similar to Indian MNCs, they have been adding 5,000-8,000 people every year.” Spokesperson of Oracle did not reply to a detailed email sent by ET. SAP refused to share details of its future plans.

Some companies such as IBM, CISCO and Dell prefer to expand in the same campus. Cisco, which occupies 2.3 million sq ft at Cessna Business Park in Bangalore, has additional 0.5 million sq ft under construction in the same facility. Dell is also setting up a 400,000 sq ft in existing campus in the city.

“We continue to invest for the long term and our significant operations in India employ over 27,000 team members, including manufacturing and R&D. Dell continuously evaluates its operation to remain competitive,” a Dell spokesperson said in response to an email.

Commercial real estate absorption is expected to pick up at a steady pace with 28 million sq ft to be absorbed by 2015, Cushman & Wakefield has said.

Source: The Economic Times

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