Why Are IT Companies The Biggest Office Space Consumers In India?

Happiness matters to human being more than anything else. A research on happiness suggests that people feel sad when they have to travel to work. Further, commuting costs you. Automobiles are expensive and so is the fuel and our time is money. To reach from one place to another, we have pay for/with the factors mentioned above. Furthermore, traffic congestions drive up our blood pressure and pose risk to the health of our hearts. No wonder commuting to work makes us sad.

Here is an example.

India's capital Delhi, a city where 1,400 cars enter the roads every day, is the most polluted city in the world. While the current government at the union territory has put in place the odd-even road space rationing for a 15-day period with a view to lessen traffic on the roads and bring down the air pollution level, people working from home may be a more efficient way to meet the desired results.

When Internet penetration was rising throughout the world in the 90s, many predicted it will make cities irrelevant. The assumption was that the shift to telecommuting will happen more in jobs in which people can easily work long-distance, especially desk jobs. Information technology (IT) and IT-enabled services are obvious candidates. The prediction, however, did not come true.

On the contrary, IT and IT-enabled services companies are the largest office space consumers in India. Recently, global e-commerce platform Amazon India leased 30,000 sq ft space in the Bandra-Kurla Complex, Mumbai's de facto central business district. When home-grown online shopping platform Flipkart leased two million sq ft office space in Bengaluru, Karnataka, this was the largest office space deal in India's history. Search engine Google recently decided to build a two million sq ft campus in Hyderabad, Andhra Pradesh, which would be their largest campus outside the United States. Tata Consultancy Services (TCS) recently leased 1.8 million sq ft space in Thane, and may lease 1.1 million sq ft more. IT companies grew at their slowest pace since the global financial crisis in 2015. Yet, these firms still contributed to 56 per cent of office space demand in 2015.

Banking and financial services, engineering, and e-commerce firms contributed to merely 29 per cent of this demand.

It seems that with greater telecommuting, firms will be able to operate with less floor space and parking spaces. Roads will be less congested. There will be less energy consumption because fewer people drive to work. Firms will be able to pay their employees more and pass on the benefits to consumers in the form of lower prices. Air will be less polluted. People will be healthier and happier. We will need less floor space in central business districts of cities and other expensive localities. To cut a long story short, telecommuting may solve many real estate problems, or so it seems.

A look at why companies still may try to keep it real:

Not committed enough?

A plausible reason is that it is difficult to observe employees when employers do not see them in the three dimensional world. But, it is quite possible to monitor workers through Skype or similar applications, even if they are working in another part of the world. Some economists argue that workers can demonstrate their commitment to employers by showing up in office. Many employers, for instance, assume that an employee who prefers to work from home is not committed enough. But, people who spent many hours a day on the road doing nothing at all are, if anything, committed.

It is possible that employers cannot read the emotions of employees or their tone of speech when they work from home. But, many experts argue that the cost of tone readers is lower than the cost of commuting. It is important to note that IT and IT-enabled services companies know more about the best teleconferencing tools, applications. They know the best possible ways to allow employees to communicate over long distances. But, they buy expensive some of the most expensive real estate in Thane, Bandra-Kurla Complex, Bengaluru and Hyderabad to connect people at a much higher cost.

Co-operating better

One explanation is that people co-operate more when they see each other face to face. It is quite possible that commitment is more common among people who see each other face-to-face, but this does not prove that the typical telecommuter is less co-operative than the typical person who commutes to the workplace. It is also possible that people produce more when they are closer to people who produce more. Some experiments prove that even the performance of grocery clerks improve when they are around star grocery clerks.

When software companies cluster together in a neighbourhood, there are other benefits. Employees can acquire a wide range of skills from moving from one job to another. Startups can easily find employees from the same neighbourhood. Technology nerds live close to other technology nerds. But, many of these functions can be done long distance, too. For instance, the Internet provides a wider pool of potential employees than any neighbourhood in the world. However, it is true that the Internet cannot replace the pleasure of face-to-face interactions.

Seeking inspiration

People also inspire each other. This is more difficult to do long-distance. Cities also provide higher-quality audiences for their ideas than small towns. It is true that the quality of discussions on Internet forums is far superior to that in any university. But, people feel quite intensely when such discussions happen in the real world. Such intensity of emotions are perhaps more important for creative work and greater productivity. Whatever the true explanation, this is one of the most important questions of our times.