IT firms renew office leases even as employees work from home

Santhosh Kumar, Vice Chairman – Anarock Property Consultants, said that major tech companies like Accenture, Oracle, IBM, Tech Mahindra, Tata Consulting Services, Microsoft and Capgemini have all renewed their office lease recently for 8-9 years.

Hyderabad: Despite talking of permanent work-from-home policies for their employees in the future, major IT companies in India are surprisingly keeping their office space intact in the country and not making any downward adjustments.

Talking to ETV Bharat, Santhosh Kumar, Vice Chairman – Anarock Property Consultants, said that most of the tech firms in India have been renewing their office leases for almost the next decade.

“During the initial days of the pandemic when companies leapfrogged to adapt to the new work-from-home model, there was widespread anticipation that office space demand will see a major decline. But current trends do suggest otherwise,” said Kumar.

“Major tech companies like Accenture, Oracle, IBM, Tech Mahindra, Tata Consulting Services, Microsoft and Capgemini have all renewed their lease recently for 8-9 years from now despite successfully experimenting the work-from-home model,” he added.

However, a few large IT companies are indeed seen moving out of the metros to tier II cities, in a move that could save costs related to human resources, infrastructure and real estate.

“We are seeing few large occupiers de-centralizing and wanting to be in closer proximity to residential spaces for their employees,” said Kumar.

For instance, Tech Mahindra and Cyient inaugurated new delivery centres operating at Warangal’s Madikonda IT Park in Telangana this year, employing a total of nearly 1,800 software engineers.

Office Rentals Stable

Kumar said office rentals will neither increase nor decrease this year as developers have been trying to retain their old tenants rather than getting new ones.

“Rentals in office space in 2020 will more or less remain stable because developers wouldn’t want the market benchmark to change,” he said, adding: “Instead, they are willing to offer discounts such as rent deferrals, camp discounts or rental waivers (for 2-3 months as the case may be) so that the overall rental outgo of their tenants is reduced, and they get some relief.”

As for 2021, the leasing activity will fare better in comparison to 2020, Kumar noted.

“Continued work-from-home culture will get compensated by the de-densification of office space and thus we may see renewals happening. However, in terms of a new lease, the under-construction office space will have to keep their rentals at a competitive price in order to attract tenants,” said Kumar.