IT/IT ENABLED SERVICES (“ITES”) INDUSTRY
• The IT/ITES industry in India is a growth engine
for the economy, contributing substantially to
the increase in the GDP, urban employment and
exports. The Federal and the State Governments
have played a major role in positioning India as
the IT/ITES hub and a major outsourcing location
in Asia.
• According to the National Association of
Software and Services Companies (“NASSCOM”),
it expects revenues from the IT/ITES and
Business Process Management (“BPM”) sector
to reach US$225 billion by 2020. India’s IT
and BPM sector exports are estimated to
grow by 11.4% to US$98 billion in FY14/15
and domestic revenues are estimated to
grow by 14.3% to US$48 billion for the same
period. For FY15/16, NASSCOM forecasts
that the Indian IT and BPM sector would
grow by 13-15% to US$165-168 billion.
OFFICE MARKET OUTLOOK
Bangalore
• In the last eight years, Bangalore and Whitefield
micro-market had witnessed steady supply and
absorption of office space. Compared to other
major cities in India (such as Mumbai, NCR,
Pune, Chennai and Hyderabad), Bangalore
witnessed the highest quantum of office space
absorption over the last 4 to 6 years. Bangalore’s
total absorption in 2014 was 12.6 million sq ft
and Whitefield micro-market accounted for 23%
of the transacted space.
• Bangalore’s commercial office vacancy was
14% in 2013 and 13% in 2014. The vacancy
trend is expected to remain at the current
level due to upcoming supply. Rentals in the
peripheral markets, including Whitefield, are
also anticipated to remain stable as they remain
the preferred occupier destination due to the
availability of large contiguous spaces.
Chennai
• The average commercial office space absorption
in Chennai has been approximately 4.2 million
sq ft per year during the last six years. Absorption
in 2014 was around 4.0 million sq ft. Due to the
high vacancy witnessed during 2009 to 2011,
there was a decline in the supply of commercial
office space in 2011 to 2014. Vacancy level
decreased from 16% in 2013 to 14% in 2014
due to the limited supply.
• The overall supply of office space across the
next two to three years in Chennai is anticipated
to be approximately 5.0 million sq ft. Due to
the limited supply of IT Special Economic Zone
(“SEZ”) closer to the city, SEZ spaces in suburban
locations are expected to witness heightened
demand in the near future. This could exert
upward pressure on rentals.
Hyderabad
• Hyderabad witnessed approximately 4-5 million
sq ft of office space absorption per year from
2009 to 2014 and the Madhapur micro-market
accounted for 50-60% of transactions. While the
overall vacancy level in Hyderabad was 18% in
2014, Madhapur micro-market remained tight
with a 5% vacancy rate.
• Demand for office space is expected to increase
moderately in the next two years driven by
improved economic conditions and stable political
scenario in the State. Rentals are expected to rise
in the suburban micro-market, due to the limited
vacant commercial space and remain stable in the
short term for the other micro-markets.
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