TCS in talks to lease out 3.5 lakh sq ft Thane space

Written by Shubhra Tandon | Mumbai | Updated: Jan 17 2013, 08:36am hrs
Tata Consultancy Services, Indias largest IT services company by revenues, is looking to lease out close to 3.5 lakh square feet space in Thane, a suburban area of Mumbai, which is fast turning into an important hub for housing back office operations of a number of IT companies.

With the year just started, the deal is set to be among the largest lease transactions in terms of size, expected to be completed during the year.

According to sources with knowledge of the development, TCS is currently negotiating a deal with Mumbai-based Neptune Developers for leasing out its entire building called Neptune Elements in the Maharashtra Industrial Development Corporation (MIDC) area of Thane. Though the rentals on this deal are still being ironed out between Neptune and TCS, sources say Thane is commanding around R50 per sq ft rate.

At R50 per sq ft, the deal would work out to be around R21 crore on an annual basis. This is said to be TCS third back office in the Mumbai region. The company already operated two such offices in Goregaon and Powai, western and central suburban areas, respectively.

The upcoming location is believed to house about 3,500 work stations of TCS. TCS did not respond to a mail from FE, saying the company was in a silent period ahead of its December quarter results announcement on Monday.

There have been signs of improvement in the US economy over the last few months, which should have a positive impact on business of Indian IT/ITeS companies, said Aniruddh Wahal, director (occupier services - west), DTZ, a global real estate consultancy firm. The back office demand will be healthy for the sector as the companies will look to expand as overseas business increases, said Wahal.

In the last two years, sluggishness in the US and European markets kept the margins of Indian IT companies under pressure. According to Samantak Das, national head (research), Knight Frank India, IT/ITeS commanded 42% in the office space traction in the fourth quarter of 2010-2011. However, it shrunk to 20% in the June-March quarter of 2011-2012 as negative global cues affected the sectors business sentiment, making the sector go slow on expansions.

However, 2013 will bring in cheer for the IT/ITes real estate as the demand is expected to grow. According to DTZs latest report, IT/ITeS is expected to grow at 13% and generate $110 billion in revenue. The sector is expected to require additional IT office space of 15.96 million sq ft to accommodate additional work force of approximately 0.2 million. The office space demand from the sector in 2013 is likely to increase by 34%.

For Mumbai, IT/ITeS sector companies showed a marked preference for the large format office spaces available in Vikhroli, Andheri (E), Powai and Rabale in Navi Mumbai during the second quarter of 2013 fiscal, said Knight Frank India in a November report.