BENGALURU | MUMBAI: Commercial real estate absorption is likely to be affected with the software industry body Nasscom lowering IT export growth target to 8-10% for 2016-17 amid global macroeconomic headwinds, including the fallout of Britain’s exit from the European Union as well as Donald Trump’s victory in the US presidential polls.
At the start of the year, Nasscom had projected 10-12% growth for Indian software services, including business process management, for the current fiscal. Nasscom estimated the incremental revenue addition to be between $8 billion and $10 billion in 2016-17, against $10 billion in 2015-16.
India’s commercial real estate is led by information technology/IT-enabled services, mostly with North American companies absorbing over 80% of total IT/ITeS space pick-up. However, the share has been receding for some time now.
“2016 was a year of consolidation for the IT/ITes clients. First quarter can be a muted one; we will see a lot of last year’s transactions spill over to this year. In 2016, IT/ITes services companies formed around 50-55% of the total office space absorption in the country. It had dropped from 60-65% in 2014-2015,” said Ritesh Sachdev, MD, tenant advisory services, Cushman & Wakefield.
Nasscom downgrading growth projection is likely to impact the commercial space absorption in the coming quarters. Overall absorption by IT/ITes firms this year is expected to be slower than 2016 due to lower supply and lesser newer acquisitions.
Few companies have also been asked to optimize assets and bring down the overall real estate costs by 15-20%. Real estate is the second largest operational cost after human resource expenditure for these companies.
However, developers focusing on commercial spaces are hopeful that the scenario will continue to be in favour of India and software companies operating out of the country.