IT-ITeS sector leases 10% more office space in 2016

The average size of leased area fell by 14% to 27,000 sq ft in 2016 from 31,200 sq ft in 2015

Office space leasing by IT and ITeS companies rose by 10% last year at 16.81 million sq ft with Bengaluru and Hyderabad absorbing more than 50% of this space, according to JLL India.

"IT, ITeS occupiers have taken a big leap in office lease transactions in the last 15 years. Office space demand from them increased from 1.4 million sq ft in 2001 to 15.2 million sq ft in 2015.

"With 16.81 million sq ft area transacted in 2016, it translates to a 10% increase (y-o-y)," JLL India CEO & Country Head Ramesh Nair said.

Interestingly, he said, Bengaluru and Hyderabad together accounted for more than 50% of this total pan-India IT space absorption.

The consultant also said that the transaction sizes are becoming smaller.

The average size of leased area fell by 14% to 27,000 sq ft in 2016 from around 31,200 sq ft in 2015.

Nair advised developers to design business parks for smaller requirements and shift focus from quantity to quality of tenants.

The number of lease transactions rose 52% to 628 last year from 414 in 2015. In 2001, there were only 19 IT leasing transactions.

"The growing transaction numbers indicate that IT companies which previously preferred built-to-suit office complexes increasingly prefer to lease offices which offer flexibility," he said.

JLL India said many Indian IT firms, especially the bigger ones like Infosys and TCS, earlier used to prefer constructing their own campuses. But, now they go for leasing as client contracts of many of these companies get shorter.

Many IT firms in India have followed the principle of 'one dollar real estate cost' and typically lease quality spaces that charge rents below Rs 65 ($1) per sq ft per month.