Despite uncertainties, office leasing by IT firms rises in tech hubs

Office leasing by information technology (IT) companies rose in tech hubs, such as Bengaluru and Noida, last year, despite uncertainty in the political and business environment in the US and Europe, the main offshore markets for such firms.The share of the IT segment in the office-leasing space in Bengaluru has gone up from 70 per cent in 2016 to 77.32 per cent in 2017, according to property data analytics firm Propstack. In Noida, the share of the IT segment has shot up from 59 per cent in 2016 to 64.17 per cent in 2017.Even in financial hub Mumbai, the share of the IT segment has risen from 46.4 per cent to 50 per cent, Propstack said.“Companies that have an option to buy space for the long term increasingly prefer to lease for the short and medium terms to retain flexibility in business operations.

It also positions them better to handle potential uncertainties due to the prevailing political and business environment in the US and Europe,” said Raja Seetharaman, director, Propstack.Seetharaman added clients have been able to maintain the status quo instead of escalated rentals, and in some cases, managed to structure better deals.“Transactions sizes are getting smaller at an average of 25,000 square feet. The lock-in period is getting shorter and overall flexibility is being structured in lease terms such as rent escalation,” he said.Ashok Kumar, managing director, Gennext Parners, said leasing activities by both overseas and domestic IT/ITes companies in past six months have gone up after nine months of a wait-and-watch policy, due to the disruptions of demonetisation, Rera, and the GST in 2016-17.“The demand will continue to be driven by IT/ITes, BFSI, industrial and logistics, due to the push for Make in India, innovations, co-working spaces, increasing demand by millennials for small formats such as wine, beer, tea bars and cafes, and the food and retail sectors. We expect leasing of space to touch 35 million sqft in 2018-19,” he saidTotal leasing volume last year was 42.8 million sqft, marginally up from 2016’s absorption level of 41.6 million sqft.Bengaluru remained the frontrunner in office leasing, witnessing a record of more than 15 million sqft, occupying 36 per cent of the market share. It was followed by the National Capital Region (18 per cent), Mumbai (13 per cent), Chennai (11 per cent), Hyderabad (10 per cent), Pune (8 per cent), and Kolkata (2 per cent).The demand for Grade-A office space was primarily driven by technology companies, followed by engineering, manufacturing, banking and finance, and co-working operators.