Bengaluru sees 8% CAGR in rental growth over last decade; NCR, MMR remain flat

Despite the robust growth of technology sectors and steady increase in headcount, the rentals of the commercial offices did not grow much in the last decade.

At a pan India pan India level, the CAGR of rental growth for the previous decade has been merely 2%, which is lower than even the inflation rate. At a city level, Bengaluru witnessed about 8% CAGR in rental growth, while the NCR and the MMR remained almost flat over the last decade. Rest of the metros had a modest 3% to 4% CAGR in rental growth, mentioned Colliers International..

The IT-BPM sector has been the prime driver of the office demand in India over the last decade. The employment in the IT-BPM sector grew at a rate of 6% CAGR over the last decade. The employment figure reached about 4.4 million in 2020 from about 3.0 million employment in 2011, which is an addition of 1 million skilled white-collar jobs. The IT-BPM sector’s job growth remained steady even during the pandemic, the report mentioned.

“The IT-BPM industry in India accounts for 55% of the total global outsourcing market. It accounts for more than 45% share in India, the largest in total services export. We expect the Indian IT & BPM industry to grow to US$ 350 billion by 2025 and BPM to account for US$ 50-55 billion out of the total revenue. India is the top off-shoring destination for IT companies across the world. Emerging technologies now offer an entire new gamut of opportunities for top IT firms in India, having both on-shore and off-shore services to global clients.,” said Arpit Mehrotra, Managing Director, Office Services, South India at Colliers.

READ  Bank of Baroda mulls hiring digital marketing agencies to strengthen brand, customer outreach

Bengaluru also leads the pack of IT-BPM office spaces with about 162 million sq.ft. at the end of 2020, followed by Delhi NCR and Mumbai at 116 and 104 million sq.ft. respectively. In recent years, Hyderabad made rapid growth in IT-BPM job creation, where the annual gross absorption of commercial office space has been around 5 to 6million since 2016, although it did touch a high of over 9.5 million square feet in 2019. The commercial office stock across the top 7 cities grew almost 1.8 times to reach half a billion square feet between 2010 to 2020.

“In the coming days, cost optimization will be one of the key focuses for the IT, BPO companies. Since the companies have mainstreamed the decentralization of work during the pandemic, they will now be more open to exploring markets where human resources and real estate costs are low. As we advance, IT BPO companies could try to optimize their business, keeping the cost in mind as well as a hedging strategy against any future disruptions, with a hub and spoke model that might include flexible spaces, multi-city locations, and home offices,” said, Subhankar Mitra, Managing Director, Advisory Services (India), Colliers.

Currently, for the IT-BPM companies, the real estate cost per employee was about Rs 98 thousand per year, which grew to Rs 1.17 lakh by 2020. For IT-BPM companies, the biggest cost head is the salary of the employees. According to the filing at the stock market, TCS, Infosys, Wipro all have paid more than 50% of their top line as salary. On the contrary, the real estate costs for the IT -BPM companies are only about 8-10 %. The top banking companies like SBI, HDFC and ICICI spend about 10 to 17% of their top line as employee cost, mentioned Colliers International.

READ  Ore shortage hits Indian steel companies, industry bodies seek ban on exports



Please enter your comment!
Please enter your name here