Gurgaon, 22 March 2016
– A report released by Colliers International, ‘Dealing with Explosive Growth: How Tech Occupiers Use Real Estate to Harness Opportunities’
reveals how changing requirements for real estate among regional technology companies is altering the demand dynamics for office space across Asia and especially in India. In 2015, 58% of the total office absorption was contributed by IT/ITes companies.
There are many similarities between traditional space occupiers and technology tenants. These include an increasing drive to attract the best talent and a focus on cost. Many technology tenants are experiencing strong growth in headcount which can make long lease terms more difficult. Similarly, the ability to take on more space over the term of the lease is frequently required.
According to Surabhi Arora, Senior Associate Director, Research at Colliers India: “Given the growth these firms are achieving in India there is a significant amount of pre-commitment activity taking place. The large requirements typically demanded by technology firms in India mean that the types of buildings required have large floor plates, uninterrupted power supply, ample parking and amenities like cafeterias and gyms. In India there is a greater focus on space efficiencies, but there is also a stronger drive to create environments that are attractive to highly creative, and typically younger, employees”
In addition, because tech–sector tenants are usually growing much faster than those from mature industries, landlords are moving to provide more flexible workspaces and leasing arrangements that can accommodate hard-to-predict changes in employee headcount. Ultimately, technology tenants choose a location that allows them to attract the best people. For example, in Singapore technology firms typically target Premium Grade-A buildings in both CBD and Business Parks. However, in high growth markets such as India, occupation trends are more diverse and they prefer to be located in Campus style or Grade-A multi tenanted buildings in SBD or PBD areas. The strong growth of occupiers, as well as the amount of space that is set aside for research, are driving the locations that are being occupied. Smaller firms appear to be more likely wanting to co-locate with the larger, more established groups, a direct contrast to what is happening in low growth markets.
In India, Bangalore, Pune and Gurgaon are the preferred locations among tech occupiers, primarily because of the ability to attract talent and the ability to access Grade A buildings at affordable rents. In 2015, IT/ ITes contribution to office absorption was reported to be 57% for Bangalore, 64% for Gurgaon and a whopping 74% for Pune. Generally, there are sub urban clusters in each city where these tech firms prefer to be located. For example, ORR in Bangalore, Cyber City in Gurgaon and Hinjewadi in Pune. Key drivers for tech firms clustering in these locations are tenant retention and proximity to clients and vendors. Recently, Hyderabad has also emerged as one of the alternative locations, as the city which was under political stress for couple of years is reviving again. The trend is evident from the recent expansion plan by companies like Google, Uber and Apple that have taken large office spaces in Hyderabad. Other new entrants are the e-commerce firms with companies like Amazon and Snapdeal recently taking significant amounts of space in Bangalore and Gurgaon.
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