IT sector leads 49% jump in office real estate adoption in CY22: Report

India’s information technology (IT) services and business process management (BPM) sector led the country’s resurgence in demand for office real estate, according to a report by real estate consulting firm, Savills India. While office space adoption rose 48.5% year-on-year (YoY) to reach 54.8 million square feet, the IT-BPM sector accounted for 38.9% of this adoption.

The office space demand comes off the back of relaxation in Covid-19 norms, as more offices and businesses returned to formal workplaces — or at least adopted a hybrid work model. According to Savills data, IT firms added 18.2 million square feet of new office space last year, which grew by 17% to add 21.3 million of new office space this year.

While other sectors accounted for lesser overall space in comparison to IT services, they still recorded faster growth. For instance, ‘flexible workspaces’, which comprise coworking organisations such as WeWork India, saw its net real estate demand rise from 4.7 million square feet in 2021 to 7.7 million this year — a rise of nearly 64%.

The latter was also the second highest contributor to office real estate in India this year.

The growth in real estate demand from IT services has risen steadily through the year. For instance, during the company’s earnings call in the September quarter, C Vijayakumar, chief executive of HCLTech, told reporters that the company has been steadily adding new offices across India through the year, called ‘new vistas’.

“We already have 25,000 individuals working in these facilities, and each year, we will hire 5-10% more headcount to these facilities than the average addition we make to our workforce, to grow them,” he said on October 13.

Tata Consultancy Services, India’s largest IT turn by market cap, said in July this year that it plans to add eight new offices that can seat 10,000 employees in each, and announced a specific focus on tier II markets for this expansion.

Prior to TCS, India’s second-largest IT firm, Infosys, announced plans to add four offices with at least 1,000-seater employee capacities in Coimbatore, Vizag, Noida and Kolkata. The additions were tipped to be completed by the September quarter.

Moves to add new office spaces for each of these companies were seen as efforts to offer recruits the ability to be closer to their home regions, in the aftermath of individuals shifting to their hometowns during the Covid-19 pandemic. Coupled with rising attrition and employee costs, firms sought new facilities as a way to attract new employees.