With the spate of layoffs by the likes of Google, Microsoft, Boeing and so on, and looming recession in the US, the country’s top office developers believe that outsourcing to India will increase and the demand for office properties will improve this year.
Google recently sacked 12,000 staffers across verticles and so did American tech giants Microsoft and Amazon, which laid off a cumulative of 28,000 people.
Boeing is slashing around 2,000 jobs this year in its finance and HR roles through a combination of attrition and layoffs. According to a Seattle Times report, the company is outsourcing about a third of these jobs to Tata Consulting Services (TCS) in Bengaluru.
“If the US goes to recession, there would be cost pressures and outsourcing will grow and that business will come to India in the next two to three quarters,” said Aditya Virwani, chief operating officer at Bengaluru-based Embassy Group, which has also listed a real estate investment trust or REIT in the country along with its partner Blackstone earlier.
Virwani said cheaper Indian real estate and talent would help attract more business from the US. “We believe the next four months will be decision-making and expecting big activity in the second half of the year. We believe we will surpass in terms of net leasing,” he added.
Niranjan Hiranandani, managing director at Hiranandani Group, agreed. “If the US goes to recession, it means companies can’t afford costs and have to outsource their operations to countries like India which has cheaper costs. I believe outsourcing will increase and Indian companies would gain.”
Sanjay Dutt, managing director and CEO at Tata Realty & Infrastructure, said that talent, cost arbitrage, stable political, investment climate, successful Covid-19 management, drive for ease of doing business, and over two decades of profitable businesses in the county, has made India a global capital and strategic partner of outsourcing, R&D, product development, and AI across sectors.
“India is ‘definitive destination’ and its positive impact despite the hybrid work environment would be felt on office demand. India will sustain conservatively on an average 30 million square feet net private development for lease absorption till 2030. We will cross 1 billion sq ft if we include self-developed and occupied campuses of Indian IT majors like TCS, Wipro, Infosys and so on,” Dutt said.
However, some of the property consultants disagree.
“Given that companies are now not expanding, and most clients are looking to cut down on assignments and are not awarding any new contracts, so we will not see any increase in outsourcing to India in the immediate future,” said Prashant Thakur, senior director & head – research, Anarock Property Consultants.
Thakur added that India is not decoupled from the IT slowdown and layoffs being seen in the Western markets and has, in fact, been seeing its own share of IT/ITeS-specific firings.
“The office leasing market witnessed strong momentum in the first half of 2022, but the growth fizzled out in the second half. About 10 million sq ft of corporate RFPs (request for proposals) were withdrawn or deferred in the second half of 2022,” he said, adding that the looming recessionary threats in major economies and a slowdown in hiring by Indian IT/ITeS were the major causes of benign demand in the second half of 2022.
Kaustuv Roy, managing director-business solutions at Savills India, said: “A recession doesn’t automatically mean that companies will move jobs to India to reduce costs. As recent media reports have shown, job cuts have also affected Indian employees at global firms.”
He added that even if some functions were to move to India, the numbers would not be large enough to require an immediate increase in workspace. With the current flexibility in work-from-anywhere arrangements, the current office spaces have enough capacity to accommodate the potential headcount increase, Roy said.