Covid-19 impact: MNCs strike big rental deals despite work from home push

Global firms such as Google, Accenture, and Intel, among others have signed several lease rental deals for office spaces in recent weeks notwithstanding the disruptions caused due to the Covid-19 pandemic.

What is interesting is the deals happened despite companies pushing for work-from-home set-ups and analysts expecting many of them to call off lease agreements.

RMZ, one of the biggest owners of office properties in southern India, has done a handful of lease rental deals with global firms in recent weeks. Chairman Raj Menda said: “The world has not ceased to exist. After Covid-19 issues are sorted, people will get back to work.”

Property consultant Cushman & Wakefield had recently said demand for commercial space as a whole are expected to come down by 45 per cent in the current financial year and rents were expected to fall 5-10 per cent.

But according to Shobhit Aggarwal, managing director and CEO at Anarock Capital, global firms will continue to lease spaces in good-quality properties. “There are several learnings that have emerged from the Covid-19 pandemic. One is that work from home is not a blanket solution for all firms. The return to office movement is inevitable, and the focus is on extremely high-grade office spaces where the best practices of sanitation, safety, and simultaneously productivity are implementable,” Aggarwal said.

“In India, such high-grade, future-proof spaces are rare and, therefore, highly investable assets. Rents in such office spaces will not follow generalised trends but beat their own path,” he saidMenda said US-based Accenture had taken 800,000 sq ft in Startech Park, a joint venture between RMZ and Prestige Estates, in the Koramangala area of Bengaluru. At a rate of Rs 100 per sq. ft, Accenture is expected to shell out about Rs 96 crore in annual rent, according to sources. Accenture did not share any comment for the story.

Global chip manufacturer Intel has taken 250,000 square feet in RMZ Ecospace in the Sarjapur area of Bengaluru. At a rate of Rs 95 per sq. ft, Intel is expected to pay an annual rent of Rs 28.5 crore, sources said. An e-mail sent to Intel did not elicit any response. Another US-based company Providence took 370,000 sq. ft in RMZ’s Nexity property in Hyderabad. US-based banking firm Morgan Stanley also took 70,000 sq. ft in RMZ Ecoworld in Bengaluru, Menda said. Morgan Stanley is expected to use this as a back office for its operations, sources said. Morgan Stanley already has an office in the complex. 

Morgan Stanley did not offer any comment for the story.  Google has taken 58,000 sq. ft in RMZ’s Infinity in Bengaluru. Google also leased 1.4 million sq. ft in Bagmane Rio in Bengaluru, reports said recently.

In other deals, IBM took 280,000 sq. ft from K Raheja Corp in Hyderabad, sources said. An IBM spokesperson, however, termed the information as inaccurate. IBM has more than 10 million sq. ft of leased office across Bengaluru, Hyderabad, Noida, Gurugram, and Kolkata. Another US tech giant Microsoft is looking to lease 1.2 million sq. ft space in Bengaluru, reports said recently. According to the additions to the DRHP filed by Mindspace Business Park REIT, the firm has leased 700,000 sq. ft of space since April 1 this year.

 (With inputs from Debasis Mohapatra)