SPIKE IN OFFICE INTAKE BY MNCS A recent report says that MNCs are increasingly investing in India by purchasing office space and they accounted for 43% of the office space transactions that took place in 2012, 2013, and in the first quarter of 2013. With the signs of formation of a stable government un der Narendra Modi at the Centre, MNCs invested heavily in office space to expand their operations in the country . And, as the likelihood of the formulation of growth-oriented polices under the NDA government improved, the general mood in the economy started looking up too. Global Real Estate Consultancy firm Cushman & Wakefield, in a recent report, says that MNCs are increasingly investing by purchasing offices in India. MNCs accounted for 43% of the office space transactions that took place in 2012, 2013, and in the first quarter of 2013. They bought office space worth Rs 2,470 crore during the period, from the total transactions of Rs 5,730 crore that took place in the country during the same period. For a fair perspective, the C&W report says that in 2010, the contribution of foreign MNCs was negligible in the sale of commercial office space. MNCs in the BFSI, ITeS, FMCG, and pharmaceutical sectors are among the lead commercial office-space buyers in these markets. Citibank alone accounted for Rs 1,110 crore investment in office space. The purchase of large office space not only indicates the revival of the economy, but also that more jobs are likely to be created soon. This would naturally have a cascading effect on the demand for housing, automobiles, with other services also likely to pick up sooner than later. Healthy transactions in the office space continued in the second and third quarter of 2014, a report by CBRE also said. Anshuman Magazine, CMD of CBRE (South Asia), says: “The demand for office space has improved this year, due to the improving economic situation globally and in India. With the Indian GDP expected to rise, the commercial real estate market will see more activity in the coming months.“ Transaction activity remained upbeat in the third quarter of 2014, as corporate occupiers took up office space with greater velocity, the CBRE report said. The quarter saw numerous transaction closures towards the consolidation and expansion of corporate firms, with Bangalore, the NCR, and Mumbai attracting around 72% of office space requirements during the third quarter. Sanjay Dutt, executive managing director (South Asia) of Cushman & Wakefield, says: “Companies that have established operations in India and are confident of their projections and potential in the country are now tailoring their real estate requirement so that they can be more cost-effective. Companies in specific sectors like pharmaceuticals and IT-ITeS are looking to consolidate their R&D divisions with their front-end divisions in a single set-up and are looking for assets to purchase, as it proves to be a cost-effective strategy for them.“ Dutt says: “First-time entrants will still choose to lease premises in the emerging markets of Asia, but we expect increased traction of commercial sales led by those MNCs that have successfully run operations for a few years, especially in a market like India, which offers attractive yields and prospects for good capital value appreciation; companies stand to gain if they invest in these markets, sooner than later, and reap potential benefits, provided currency risks are managed and minimized.“ The C&W report also indicated that majority of the companies investing through purchase are from the BFSI (Banking, Financial Services, and Insurance) sector, given their strong presence and long-term plans in this sector. The other sectors that have shown keen interest are IT, pharmaceuticals and engineering firms. The report says that over the long term, buying offices always makes greater economic sense than renting premises. With the new pro-business government there has been a positive sentiment in the market and this reflects in the volume of buying that has been executed by foreign companies.
Posted on: Sat, 11 Oct 2014 05:34:05 +0000
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