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India
preferred offshore country in Asia: real estate
survey
The
fourth Corporate Real Estate Impact Survey (CREIS 4) survey by
real estate consultancy Jones Lang LaSalle says
India
remains the prime target for Business Process Outsourcing and
call centre activities while China continues to
emerge as a major destination for R&D and software
centres.
Half
the respondents to CREIS 4 indicated that they currently
offshore activities to lower cost locations within Asia
Pacific. This is broadly in line with the findings of our
survey of US-based firms, which found that 58% had already
offshored some office activities. According to a release,
companies surveyed were planning to increase the level of
offshoring for back office processing, call centres,
IT/software and R&D over the next three
years.
Mr.
Vincent Lottefier, Country Head of Jones Lang LaSalle India
said, 'The continuing cost pressures characterizing India's
Tier I cities, Bangalore, Mumbai and Delhi and Tier II cities,
Hyderabad, Chennai and Pune, are encouraging more companies to
actively look at Tier III cities to satisfy their future
requirements for the offshoring of business processes.
However, for firms entering India for the first
time, Tier I cities are likely to prevail for some time, as
they provide higher comfort
levels.'
'Tier
III cities currently provide cost advantages of 15%-30% over
Tier I and II cities through lower labour and real estate
costs and reduced staff attrition rates and this gap is
expected to widen further. Of the five leading Tier III cities
identified in our research, Kolkata and Chandigarh are best
positioned to mature into major centres over the next five
years,' added Mr Lottefier.
From
a real estate perspective, Kolkata provides the largest
availability of grade A office space, with large developers
such as DLF and Unitech, who have traditionally operated in
Tier I cities now operating in Kolkata. From a facility cost
view, Nagpur and Ahmedabad
provide a 25%-30% cost advantage over Kolkata and Delhi.
The
question of where to locate in India is a complex
one and no single city emerges as suitable for all activities
or all companies. Jones Lang LaSalle's research looked at
various scenarios which yield different location
choices.
Most
Suitable Locations for different types of
company
Scenario
--
Scenario A - Companies entering India
Cities
of choice - Tier I: Bangalore,
Mumbai, or Delhi
--
Scenario B - Companies present in Tier I cities and looking to
expand into cities offering large pools of skilled labour
(labour driven)
Cities
of choice - Tier II: Hyderabad,
Pune, or Chennai; Tier III: Kolkata or Nagpur
--
Scenario C - Companies present in Tier I cities, and looking
to expand into cities offering lowest cost (cost
driven)
Cities
of choice - Tier II: Chennai; Tier III: Ahmedabad or Chandigarh
Scenario
D - Companies present in Tier I cities that are expanding
rapidly into locations offering access to multiple labour
pools
Cities
of choice - Tier II: Pune
Looking
ahead, risk avoidance is becoming an increasing priority and
the issue for firms already located in India is the extent
to which risks will be reduced by establishing facilities in
other countries. Low cost destinations elsewhere in Asia (e.g.
Manila, Dalian and Tianjin) along with those in Central Europe
(e.g. Prague, Budapest, Warsaw and Krakow) and Latin America
(e.g. Sao Paulo and Buenos Aires) are all competing for the
same market as Tier III cities in
India.
China
has also emerged as the favoured location for future demand of
industrial real estate. Of the respondents looking to increase
industrial space, more than half (58%) chose cities in
China. This
reflects a combination of the growth of offshoring (with
China
becoming more popular for R&D activities) as well as the
continued interest in manufacturing to service the growing
domestic market within China. | 
