Tuesday, September 9, 2014

MULTI NATIONAL FIRMS PURCHASE OFFICE SPACE

Multi-national firms have invested nearly Rs 2,500 crore in under three years to buy office space in India as against leasing it, property consultant Cushman & Wakefield said. "Multinational companies are increasingly investing through purchasing offices in India... There is a seismic shift in the traditional approach of leasing space that such companies have had for years while considering overseas investment," C&W said in a statement. With rising rents in prime markets where MNCs operate, the consultant said that there is cost benefit in the long term in buying office spaces rather taking on lease. According to the report, "foreign MNCs contributed 43 per cent to the total sales value of commercial offices" during January 2012 and March 2014. During this period, the total sales value of office space was Rs 5,730 crore, of which MNCs contributed Rs 2,470 crore, it said, adding that MNCs in the BFSI, ITES, FMCG & Pharma sectors were among the lead commercial office buyers. Among major office deals, the consultant said the Citibank India bought 0.3 million sq ft office space for Rs 1,110 crore in Mumbai and Bayer group purchased 0.16 million sq ft for Rs 130 crore in Mumbai. GlaxoSmithKline bought office space worth Rs 140 crore in Delhi-NCR and Cognizant acquired office in Hyderabad for Rs 110 crore. C&W Executive Managing Director, South Asia Sanjay Dutt said: "Companies that have established operations in India and are confident of their projections and potentials in the country are now tailoring their real estate requirement so that they can be more cost-effective. "Companies in specific sectors such as pharma and IT&ITes are looking to consolidate their research and development 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 companies." The consultant noted that buying office space proves to be cost beneficial in long term as rents have been increasing every year from 2011 to 2013 in most of the prime markets where MNCs have typically leased office spaces. "Capital values have also increased moderately during the period. Hence, companies stand to gain financially if they decide to deploy capital to acquire the spaces they occupy," C&W said.

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