Pharma cos hunt for new office space as biz grows

There is fresh activity in the commercial real estate space in Mumbai and Pune, with pharmaceutical companies, including home-bred Cipla and multinational Sanofi-Aventis, looking to pick up new office space as they expand teams on the back of robust business growth in India and abroad.

Cipla, among the top three pharma companies in India, is planning to buy 1.3-lakh-square-feet space in Peninsula Business Park in Lower Parel for shifting some of its business operations from its current office in Mumbai Central. ?We are still in advance talks and negotiating on the price. We are looking to move in the next six to nine months,? a Cipla spokesperson said. According to reports, Cipla is investing R270 crore for the space.

According to estimates, pharma companies are expected to lease 10-15 lakh square feet of office space in India in the next two years. Large local consumption, abundant talent pool and comparative lower cost in India has led to several multinational pharma companies setting up shop here in the recent past.

?Domestic and multinational pharma companies are increasingly looking to consolidate their corporate and back-end operations under one roof, or in two or three locations against having business spread over several locations in the same city,? said Ravi Ahuja, executive director, Cushman & Wakefield India, explaining the surge in real estate take up in the pharma sector.

French multinational pharma company, Sanofi-Aventis is also on a look out for office space to move out from its existing office in Andheri in Mumbai?s western suburbs. According to sources, recently, US multinational Bristol-Myers Squibb has leased out 47,000 square feet space at Lower Parel and Medley Pharma has also taken up 40,000 square feet space at Marol.

In Mumbai, suburbs and far-off suburbs like Vikhroli, Powai, LBS Marg, Andheri-Kurla and Goregaon are catching the fancy of pharma companies. Real estate consultants say that since there is not much of client interface in the pharma industry, companies are looking at locations with cheaper rents.

Last year, Pfizer consolidated its corporate functioning in Patel Estate in the western suburb of Jogeshwari by taking up around 1 lakh square feet space, and is believed to be paying lease rent of about R100 per square feet for it. Johnson & Johnson also picked up 2 lakh square feet in Oberoi Commerz I in western suburb of Goregaon in 2011, and is believed to be paying close to R100 per square feet as lease rent.

?In June-March quarter of 2012 fiscal, the share of manufacturing sector driven by pharma in the office space traction has jumped to 22% against 14% in the same period last year,? said Samantak Das, national head (research), Knight Frank India.

?IT/ITeS, on the other hand, commanded 42% in the fourth quarter of 2010-2011 but has now shrunk to 20% in the June-March quarter of 2011-2012, which shows that given the high growth potential of the pharma sector, its demand for real estate is high, whereas negative global cues are affecting business sentiment in IT/ITeS, making the sector go slow on its expansion activity,? Das added.

In Mumbai, pharma companies have leased 86,000-odd square feet space till date in 2012, while Pune has witnessed leasing of a little over 94,500 square feet. Some of the other key cities that have been active in leasing activity by pharma are Hyderabad, National Capital Region, Bangalore, Kolkata and Chennai.