The IT hubs of Bengaluru and Hyderabad remained the most active office markets in India in the second quarter of 2017, despite constraints of supply, subdued business sentiments and recent layoffs by technology companies.
According property consultant JLL India, both of these IT hubs together accounted for about 47% of the total office space leased among the country's top seven cities in the April-June period.
“Outsourcing work continues to come to India. There was deferment of plans earlier, but now that has settled down,” said Raj Menda, corporate chairman of RMZ Corp, a Bengaluru-based real estate firm. It is expected that over the next two quarters the leasing activity is going to be dominated by small and mid-size transactions.
According to data from JLL India, Hyderabad witnessed a 98% jump in net absorption of office space at 1.9 mln sqft. In Bengaluru, the growth was marginal at 0.4% to 1.7 mln sqft.
Overall, office space absorption was marginally down. Total office space absorption in the second quarter was 7.9 mln sqft as compared to 8 mln sqft in the year ago period, due to lower supply hitting the market. In comparison to the first half of last year, supply fell by about 50%.
Indian IT and IT-enabled services sector has been leading the pack of commercial real estate occupiers for long, although the proportion of this has been easing of late as other sectors such as banking, financial services and insurance have started to absorb more office space. According to Cushman & Wakefield, the share of IT-ITeS has reduced from over 70% to about 50-55% of total demand consistently over the past three years.
“Last year, the pace of growth of top technology firms was in single digit due to global uncertainty and technological disruption. There is a fear that leasing by IT companies could plateau out due to clients' digital transformation, automation, artificial intelligence and protectionism due to a tighter visa regime under the current US government, which could force IT firms to tread more cautiously,” said Ramesh Nair, CEO & country head at JLL India.
UK making its exit from the European Union, drive for automation and threat of protectionism in the US post election of Trump as the president are some of the factors affecting the expectations.