In an attempt to leverage the sluggish real estate market and the resultant decline in rental prices, numerous corporates are now considering relocating their headquarters to larger office spaces, which promise enhanced amenities and facilities complemented by more abundant room.
Due to the downturn in the real estate market, rental costs have decreased significantly in prominent cities such as Bangalore and Mumbai. Many corporates are seizing this favorable shift in rental pricing as an opportune moment to move their headquarters into larger offices.
The appeal of bigger office spaces lies not only in their generous square footage, but also in the superior amenities and facilities they offer. Corporations are confident they can now access better amenities without a significant increase in expenditure, often spending an amount similar to or only slightly higher than what they currently pay for smaller spaces.
In the corporate world, the headquarters often symbolize prestige and status. The fall in rental costs in several major Indian cities has incentivized companies to contemplate relocating their HQs to more spacious and upscale offices.
Currently, numerous multinational corporations such as Bayer CropScience, FedEx, L’Oreal, PepsiCo, and Volkswagen are in the process of relocating their offices to newly constructed and larger buildings. Indian giants like Britannia, Cipla, and HDFC are also following suit in the trend of establishing bases in more expansive office environments.
Mr. Ramesh Nair, Managing Director of Jones Lang LaSalle India (West India), noted that office rentals and property values have decreased by approximately 25-40% since 2008. This drop in rental prices has motivated corporates to seek out larger office spaces, or to shift from their current offices to larger alternatives.
However, some firms are reluctant to make the leap to a new headquarters, as they worry about potential negative perceptions and how it might impact their business operations. As a result, many companies are opting to lease larger spaces for extended durations.
For instance, pharmaceutical leader Cipla has acquired 1.3 lakh square feet of office space, along with a separate commercial tower in central Mumbai, for over Rs.270 crore. Following suit, Bayer CropScience, the German agrochemical leader, has shifted its headquarters to Thane, having purchased a building from the Hiranandani Group. In a similar vein, beverage giant PepsiCo has leased 1.5 lakh square feet of office space along the Golf Course Road Extension in Gurgaon.