US firms to dominate Indian office realty this year too

American companies will continue to dominate the office space real estate in India. The list of companies that committed to lease office space in the country this year include Goldman Sachs, Google, Amazon, iGate, Oracle, Wells Fargo, United Health Group, Accenture, Fidelity, Dell, Adobe, Cognizant, among others.

No surprise there, as 70 per cent of the office space in the country is taken up by US companies on lease annually, and this has been the trend for four to five years. However, this year is different. The US has just announced a $85-billion spending cut, and American companies are under the slowdown pressure. Experts point out while the overall sentiment is negative, the developments will actually translate into steady activity in commercial real estate in India.

Since American companies dominate the Indian office space, any slowdown in the US is negative for the Indian realty, said Anshuman Magazine, CMD (South Asia), CBRE, a leading real estate consultancy firm.

However, a large chunk of office space in India is still taken up by the information technology (IT) and IT enabled Service (ITeS) sector, and as US goes through the slowdown, firms will try to increase outsourcing to optimise cost and improve efficiency, Magazine said.

Office real estate leasing had peaked in India in 2008 with an absorption of 40 million sq ft. It dipped to 25 million sq ft in 2009 due to the severe global economic slowdown, and then picked up in 2010 to touch 30 million sq ft, and 35 million sq ft in 2011. Last year (2012) witnessed a decline, with the absorption at 29 million sq ft.

Office leasing is expected to exceed 30 million sq ft in 2013, according to Sanjay Dutt, executive managing director (South Asia), Cushman & Wakefield, said. Dutt argued that American companies are under pressure to move to cheaper locations, with lower manpower cost. Due to over supply of real estate in the office space, rental cost has been under check too in several parts of the country, he said. Moreover, there are tax sops across IT parks and Special Economic Zone (SEZ) in India.

The spread of the office space portfolio into other sectors like manufacturing, fast- moving consumer goods, finance and pharma will help cushion any slowdown risk emanating from IT, according to Magazine.

Also, consolidation is expected to keep commercial realty active this year. Balbirsingh Khalsa, national director of office and industrial business at Knight Frank, said 20 per cent of all enquiries were for consolidation and shifting.

Among the eight big cities in India, Bangalore leads in pre-commitment of office space at 3.37 million sq ft, followed by NCR at 1.93 million sq ft, 1.49 million sq ft in Hyderabad, 1.35 million sq ft in Pune, 4,19,000 sq ft in Kolkata, 1,50,000 sq ft in Chennai and 32,000 sq ft in Mumbai. However, there is no booking in Ahmedabad.