Mumbai: Demand for office space from information technology (IT) companies has been declining over the past three years as the sector moves into consolidation mode and increasingly adopts innovative technologies to streamline costs.
IT companies have been one of the biggest occupiers of office space in India. However, as these companies become cautious about their expansion plans, emerging businesses in e-commerce, co-working space providers, and banking and financial services are eating into their share, said real estate consultants and developers.
According to data compiled by property consultant CBRE, the share of IT companies in overall office space absorption fell from 55% in 2015 to 49% in 2016 and 32% in 2017.
Meanwhile, demand from banking, financial services and insurance (BFSI) firms is fast catching up.
For instance, while BFSI’s share jumped to 19% in 2017 from 13% the previous year, co-working spaces was up to 6% from a mere 2% during the same period.
Engineering and manufacturing’s share increased to 17% in 2017 from 14% in 2016.
Total office absorption came in at around 40 million sq. ft last year, according to CBRE.
According to Ram Chandnani, managing director, advisory and transaction services India, CBRE South Asia Ltd, back-end and regular business processes are becoming increasingly automated as corporates start adopting new and innovative technologies such as artificial intelligence, big data and cloud computing.
“This disruptive impact of technology is resulting in corporates progressively adopting innovative technologies to streamline their operations and cut costs,” he said, adding that corporates are becoming cautious in the short term about future expansion needs.
“Having said that, while select corporates are deferring their real estate decisions, the slowdown in this sector is temporary,” he added.
For Bengaluru-based commercial real estate developer RMZ Corp, banking and financial services and IT-enabled services firms occupy 70% of the total office space it operates.
Thirumal Govindraj, managing director of the company, said the decline in office intake from traditional IT companies would be specific to certain micro markets.