Why India's Top IT Firms Are Shrinking Their Office Spaces
As the IT services sector reports its weakest-ever dollar revenue growth, companies like Cognizant, Infosys, and Wipro are reducing their office spaces to optimize costs.
Office SpaceIt ServicesIndiaCognizantInfosysWiproCommercial Real EstateReal EstateJun 19, 2024
The IT services sector reported the weakest-ever dollar revenue growth of 3.8% in FY24, according to industry body Nasscom. The sector also added the fewest employees in a year, as four of the five largest IT services companies saw a reduction in their workforce.\n\nCognizant's office space in India shrank 2.76 million sq.ft in a year, while Wipro's office space declined by 1.06 million sq.ft. Infosys's office space declined by 0.23 million sq.ft to 56.63 million sq.ft in FY24. The companies are adopting a hybrid model of work, which allows them to make better use of their current physical space.
The reduction in workforce has also made these companies relook at their future office needs.\n\nCognizant CEO S. Ravi Kumar had outlined a policy of working with 40% less office space soon after he took over in January 2023. The company expects to save its annual real estate costs by about $100 million in 2025. Wipro spent ₹1,455 crore on its physical infrastructure last year, while Tata Consultancy Services Ltd spent ₹3,100 crore to maintain its 307 offices globally.\n\nThe trend of reducing office space is not unique to India.
Big Tech firms like Alphabet, Meta, and Salesforce have also vacated some of their office spaces in expensive cities like Dublin, London, and San Francisco over the years.\n\nIndustry experts believe that the reduction in office space by IT services firms will not have a significant impact on the commercial real estate space. According to Gulam Zia, executive director at Knight Frank India, a property firm, GCCs (tech captives of foreign companies) are emerging as the biggest buyers of large commercial office space.
Frequently Asked Questions
Why are IT services firms reducing their office spaces?
The companies are adopting a hybrid model of work, which allows them to make better use of their current physical space, and the reduction in workforce has made them relook at their future office needs.
How much did Cognizant's office space shrink in a year?
Cognizant's office space in India shrank 2.76 million sq.ft in a year.
What is the expected saving for Cognizant in 2025?
Cognizant expects to save its annual real estate costs by about $100 million in 2025.
How much did Wipro spend on its physical infrastructure last year?
Wipro spent ₹1,455 crore on its physical infrastructure last year.
Will the reduction in office space by IT services firms hurt the commercial real estate space?
Industry experts believe that the reduction in office space by IT services firms will not have a significant impact on the commercial real estate space.
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