Indian IT office space lease size falls 14%

The size of office space transactions fell 14% in 2016, compared to the year before, indicating that developers need to be ready for designing business parks for smaller requirements, according to independent property consultancy JLL.

The average area leased was lower than 27,000 sq ft in 2016, compared to about 31,200 sq ft in 2015. This means that developers need to focus more on quality than the quantity of tenants, JLL said.

While the size of leases came down, the number of transactions jumped 52% to 628 in the same period. Apart from Bengaluru and Hyderabad, the two most preferred cities, micro-markets of Delhi NCR, Chennai, Mumbai and Pune also saw a good number of transactions.

The rise in the number of transactions indicates that IT companies, which previously preferred built-to-suit office complexes, increasingly prefer to lease offices that offer flexibility.

Indian IT companies such as Infosys and TCS preferred constructing their own campuses, but now, as the client contracts of many of these companies get shorter, they prefer to lease.

Office space demand for IT, ITeS companies rose 10% to 16.81 million sqft in 2016, compared to a year earlier, with more than half of the absorption taking place in Bengaluru and Hyderabad, "Indian cities are heavily dependent on IT, ITeS for job generation and office space demand. Last year, 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 on Thursday.

IT, ITeS accounted for 70% of the total office stock in the country , and it was as high as 88% in Bengaluru. Share of IT in the total office stock in Pune was 81%, Hyderabad 74%, Delhi 61% and Mumbai 55%.