Bangalore Manyata Tech Park

A rising number of information technology companies are consolidating and re-aligning leasedoffice spaces across the metros, hoping that the saving in rents and operating costs will help them buoy through the global economic storm. Among the big-ticket lease agreements locked recently is that of Mahindra Satyam company. The information technology services provider, which operates from multiple locations in Bangalore india, has taken up 5,00,000 sq ft of space in Manyata Tech Park in the city. Following suit are information technology majorssuch as EMC, Cognizant, Persistent Systems and Nokia-Siemens, all of which have acquired large office spaces to house multiple units under one roof. " information technology firms grew in sporadic manner as their clients were located in multiple locations," says RamChandnani, deputy managing director at commercial real estate broker CB Richard Ellis. "Now companies are looking at moving into one or two locations to bring efficiency and reduce transport and other costs." While EMC, a provider of storage hardware solutions, has picked up 3.5 million sq ft ofoffice space on the outskirts of Bangalore india, Cognizant has taken up 250,000 sq ft in DLF Akruti in Pune. The information technology and Business Processes Outsourcing services firm has also rented three strategic sites to expand operations in Hyderabad. This is in addition to around 7,00,000 sq ft the company had recently taken on lease in Hyderabad's K Raheja Mindspace SEZ.

Earlier, Persistent Systems, a software product development services provider, had taken up 4,70,000 sq ft of space on lease in Pune india, while wireless equipment maker Nokia-Siemens rented 8.5 million sq ft in Bangalore's Manyata Tech Park. Real estate and transport of staff constitute about 24% of an information technology firm's total costs. Consolidating offices could translate into a 15-22% saving under this head, according to some analysts. Moreover, housing staff under one roof saves expenditure on energy and housekeeping and maintenance staff. "Rental forms a large part of the total operational costs and we are looking at maximum utilization of real estate," says N Venkatraman, CFO of Sonata Softwares, which recently closed its facility in Bangalore's central business district and moved to Global Village Tech Park. "Even if we can save a rupee on fixed costs, it will directly reflect on our bottom line. All our new headcount addition will be in the new campus." Sonata, a technology solutions provider, occupies 1,15,000 sq ft in the Global Village Tech Park. The company also owns a campus in Hyderabad besides the corporate headquarter in Bangalore. Slowdown in the US and the lingering debt crisis in Europe have put nearly 85% of Indian information technology firms' revenues under a cloud. Experts say the global outlook will determine real estate spends by information technology firms in the days ahead.

"The first half of 2012 will be slow as the technology firms are expecting flat growth," says Kaustav Roy, executive director at Cushman & Wakefield. "They will look at flexible timing to maintain minimal growth but won't spend much on real estate unless there is project in hand." With an aim to cut infrastructure costs, some software makers are planning to move staff to company-owned property as they realize that owning office spaces works out to be cheaper in the long run. Among them is Tata Consultancy Services, India's top software exporter. So far active in taking up leased office space, the company is now buying land parcels across different cities to build its own facility. Tata Consultancy Services, which already owns two land parcels of over 50 acres each in Hyderabad, is now in the process of buying 35 acre of SEZ plot in Whitefield, a Bangalore suburb. " Tata Consultancy Services has seen sudden spike in growth and has to take property on lease but in the long term they are looking to build own facility to consolidate operation," said a person with direct knowledge of the development. A Tata Consultancy Services spokesperson did not respond to email queries for this story. Some companies like Mphasis are also looking to move into special economic zones after the phase out of the Software Technology Parks (STPI) scheme.

"Most companies are moving towards SEZ but the policy is not conducive," says Sridhar Raghavendra, founder of FM Zone India, a real estate and facility management firm. "There are more benefits in STPI as compared with SEZ, but in the long term it will be destination SEZ. Two years ago, of the total space occupied by Mphasis, 40% was in SEZ while 60% was in Software Technology Parks." Mphasis has introduced a two-shift system in some of its facilities to enhance utilization of fixed infrastructure. At present, 20% of the company's 36,000 staff in India is under this system. Last year, the company saved 4-4.5% on real estate. It is aiming to double this saving in 2012. Companies like Cisco and IBM, however, prefer to expand in the same campus. Cisco, which occupies 2.3 million sq ft at Cessna Business Park in Bangalore, has opted for strategic expansion. It has another 0.5 million sq ft under construction in the same facility with an option to expand to 4 million sq ft. IBM is also expanding its existing facility in the Embassy Manyata Business Park in the city. According to real estate services firm Jones Lang LaSalle, 80-85% of the demand foroffice space in India comes from the IT/ITeS sector. The sector occupied 28 million sq ft of office space last year as compared with 32 million sq ft in 2010.

Source: The Times of India