Bengaluru, Hyderabad take 50% of IT office space

The absorption of office space by the information technology sector has grown by 10% year-on-year between 2001 and 2015.

The IT, ITeS occupiers have taken a big leap in office lease transactions in the last 15 years. The absorption has gone up to 15.2 million sq feet in 2015 from 1.4 million sq feet in 2001, according to real estate consulting firm JLL.

Interestingly, Bengaluru and Hyderabad together recorded more than 50% of this total pan-India IT space absorption. Notably, the transaction sizes are becoming smaller — the average area leased was slightly over 31,200 sq feet in 2015, but went lower than 27,000 sq feet in 2016.

In percentage terms, this is a reduction of 14% year on year and implies that developers need to be ready for designing business parks for smaller requirements.  Their focus should change from quantity to quality of tenants, JLL said.

The number of lease transactions saw a 52% year on year growth, going up from 414 in 2015 to 628 in 2016. Back in 2001, there were only 19 IT leasing transactions. Last year, most of the transactions were recorded in the tech hubs of Bengaluru and Hyderabad while micro-markets preferred by IT players across Delhi-NCR, Chennai and Mumbai and Pune also saw a good number of transactions.

“Indian cities are heavily dependent on IT/ITeS for job generation and office space demand. Last year, however, the pace of growth of top technology firms was in single digits due to global uncertainty and technological disruption,” Ramesh Nair, chief executive officer and country head, JLL India said.

The growing transaction numbers indicate that IT companies which previously preferred built-to-suit office complexes increasingly prefer to lease offices which offer flexibility. Earlier, many Indian IT firms, especially Infosys and TCS, preferred constructing their own campuses.

Now, as the client contracts of many of these companies get shorter, they prefer to lease.