Leased Office Space Is The New Norm In Indian IT

by Moumita Deb Choudhury    Jun 09, 2017

leasing office

With all the layoff news doing the rounds in Indian IT sector, thanks to automation and cost cutting exercises, India’s IT and ITeS companies seem to be on a spree to zero in on leased property for office space rather than having their own constructed campuses. Office space leasing by IT and ITeS companies rose by 10 percent in 2016 at 16.81 million square feet with Bengaluru and Hyderabad absorbing more than 50 per cent of this space, according to JLL India.

“IT, ITeS occupiers have taken a big leap in office lease transactions in the last 15 years. Office space demand from them increased from 1.4 million square feet in 2001 to 15.2 million square feet in 2015.  “With 16.81 million square feet area transacted in 2016, it translates to a 10 per cent increase (y-o-y),” ET quoted JLL India CEO & Country Head Ramesh Nair as saying. 

Tech companies have a reputation of quick growth which calls for new hiring in a short time span. The companies look for space which are not rigid and accommodate employee growth.

But with all these leasing, does it mean that the layoffs are a temporary phase and will shoot up soon or does it spill more bad news which means companies do not want to invest on permanent property as office space and are just looking for temporary alternative which can be shed it at its discretion.

Rarely there are tech companies with strict working hours of 9-to-5. Accounting and HR departments may be working traditional hours, but software development teams’ working hours are different and that is why companies look for office space that is accessible 7 am to 11pm.

Another important aspect why tech companies prefer leased office space is because they look for prime locations where the cost of building property is high and availability of vacant space is low. High network connectivity in tech company hubs is yet another reason leasing space in such locales.

Tech companies are not investing in permanent properties:

South Korean conglomerate, Samsung India Electronics Ltd signed a deal for office space of around 1 lakh square feet to set up its corporate office at Oberoi Realty Ltd’s commercial property Commerz II in Goregoan suburb of Mumbai, according to a LiveMint report.

The company will pay Rs. 135 per square feet as monthly rental with an advanced payment for six months, while the deal has been signed for next five years.

In 2016, Samsung got into a deal to lease 3.5 lakh square feet space at Two Horizon Center, a top office building developed by DLF Ltd at Gurugram. The space is rented out to Samsung for Rs. 140 per square feet per month which the company uses as its headquarters and is the largest commercial property lease deals in recent times.

For the last few years, tech companies have shown up to be primary leasers in cities including Bengaluru, Delhi and National Capital Region, Hyderabad, Pune and Mumbai.

Companies like TCS and Infosys have building sprawling campuses even a few years before but now even they bank on leasing as client contracts go shorter.

Tech companies out there are out for risk mitigation as global high and lows are unpredictable and with this, perhaps the trend of individual company campuses will soon perish giving rise to multideck buildings with several companies tugged in.