IT cos may be seeking to consolidate real estate in top cities as small towns take centre stage – The Economic Times

lipped from: https://economictimes.indiatimes.com/tech/technology/it-cos-may-be-seeking-to-consolidate-real-estate-in-top-cities-as-small-towns-take-centre-stage/articleshow/93036228.cms

SynopsisReal estate experts said that the earlier mix was skewed in favour of large cities in the ratio of 90:10, but post-Covid, it could be higher in favour of small towns (85:15) even though metros will continue to dominate with large IT campuses.

Some Indian and global IT companies are looking to rationalise their real estate in large cities even as others are going slow on or entirely halting expansion in metros, as they expand aggressively into tier II and III cities to tap talent that moved back to their hometowns during the Covid-19 pandemic, company executives and analysts told ET.

Tech Mahindra, for instance, is consolidating and rationalising its campuses to make way for small town centres while converting larger facilities into experience centres for customers and flexible workstations for employees, Jagdish Mitra, chief strategy officer and head of growth at

Tech Mahindra

told ET.

“Wherever you have your own setup, you consolidate those…they become the showcase centres for customers. When you are not on fixed property, you want to give it away,” said Mitra.

The company has been expanding rapidly in cities like Chandigarh, Vijayawada, and Warangal to be closer to its employee base. “It will get rationalised with some thought process based on customer and employee requirements,” he added.

The company is still in the process of creating more capacity for over 30,000 people it hired last fiscal year, he said.

Real estate experts said that the earlier mix was skewed in favour of large cities in the ratio of 90:10, but post-Covid-19, it could be higher in favour of small towns (85:15) even though metros will continue to dominate with large IT campuses.

“Yes, consolidation of office spaces is taking place and companies having multiple office spaces are coming into one or two,” said Anuj Puri, chairman, Anarock Group.

“Also, trends indicate that a few large occupiers are seen to be de-centralizing and coming in closer proximity to residential spaces for their employees – from central business districts to either the secondary business district areas or peripheral areas. Others including tech-giants like IBMOracle,

TCS

have preferred to renew their leases,” Puri added.

HCL Tech, India’s third largest software services firm by revenue, is focused more on small-town expansion currently.

“Basically, we are not expanding our real estate capacity, given that a significant amount of people are working from home, and they will continue to do so in the long run as well. We also see small towns as a very, very good opportunity to get the right talent…We may look at a few more locations as well as part of our planning,” chief executive C Vijayakumar told ET.

With the sector witnessing both blockbuster growth as well as record attrition rates in the previous fiscal year, companies have realised that centres closer to employees work better to attract and retain talent. Some companies are studying employee demographics to determine their next location while others are establishing multiple campuses simultaneously.

Wipro

is not looking at expanding at all, although it is not shutting down any office space yet, said chief executive Thierry Delaporte.

“What if you open offices in tier III cities and our employees still prefer to work from home? We are not shutting down offices, but we are turning them into different environments,” he said. These are not cost-based decisions but based on employee preference, he added.

TCS is not giving up any existing real estate but opening eight new campuses in small towns.

Large corporate occupiers are not effectively reducing their real estate footprint in top cities but are carefully recalibrating the next steps as they seek to achieve a balance between business growth and employee need for flexibility, said Rahul Arora, head of office leasing advisory and retail, India, at industry consultancy JLL.

“Over the past two years, most tech companies have grown and hired more people across locations. Some occupiers could possibly hit the pause button as they internally evaluate whether to continue growing in tier I cities or to go closer to their employees in tier II or III cities,” Arora said.

While infrastructure in tier II cities is still catching up to the massive demand, real estate experts have noted a rapid increase in the need for IT services campuses that match the amenities of their global campuses, in locations like Jaipur, Indore, Coimbatore, Bhubaneswar, among others.

In many cases, companies are going for managed campuses starting with 100-250 seats to ensure that employees have a base to work from even if an owned campus takes longer to be set up.
(Originally published on Jul 22, 2022, 06:00 AM IST)

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