Friday, July 12, 2013

Why And Where Corporates Are Relocating Their Headquarter

Why And Where Corporates Are Relocating Their Headquarter

A number of large corporates across the country have relocated or are in the process of relocating their headquarters to other areas. There are many reasons for this.

·         Expansion Needs


One of the primary objectives behind companies relocating their headquarters today is the need to expand. Despite the uncertain business climate in India, many large companies are witnessing rapid growth and find their current premises inadequate to accommodate their expansion plans and increased headcounts. The obvious solution is to move to locations which provide larger commercial spaces.

·         Consolidation

 Another reason for corporates to relocate their headquarters is consolidation - the hottest trend on the commercial real estate market these days. Many of the top tier companies operating from multiple locations in a particular city are seeking to consolidate all key functions and verticals into one office. By this, they aim - among other things- to ensure better coordination and flow of information. There are significant cost advantages in such a strategy, but the improvements in operational efficiency of business and coordination among teams is invaluable.

·         Increasing Costs / Rental Pressure


In a constrained economic environment, almost all companies have a standing mandate to rationalize expenses - and real estate a significant expense for any large company. Many corporates that find the real estate costs of their current locations unsustainable over the long run are now opting to move to new locations which offer similar advantages and facilities at comparatively lower prices.

·         Improved Brand Positioning


As an inherent business dynamic, companies will always seek to be more strategically located so that they can capitalize on a larger client base and be closer to the competition. This enables them to position and market their brands more effectively. It is, in any case, a given that all companies want their headquarter to be in high-profile locations that offer proximity to the airport and sufficient quality lodging facilities for frequent traveller and regular guests.

·         Better Infrastructure And Building Quality


Many companies operating their headquarters from leased premises have had to continue on those premises due to lock-ins. When the expiration of a lease is imminent, these companies are finally able to decide on moving to new and more developed locations with better infrastructure and accessibility. Moreover, many currently occupied headquarter premises were built almost a decade ago. This means that they lack quality of more modern structures which meet global standards and safety norms.

In other words, the relocating corporates benefit from the availability of more spacious, better-designed office buildings that provide a better workplace experience to employees, in addition to sufficient parking and approach infrastructure.

In short, companies relocate their headquarters for:

·         Building quality and safety norms

·         Accessibility

·         Surrounding infrastructure and environment

·         Energy efficiency and overall efficiency

·         Image/brand perception of the new address


Recent Examples of Corporate HQ Relocation:

·         Volkswagen: This automotive giant took up over 1 lakh square feet of office space in Andheri, Mumbai to shift its India headquarters from Bandra-Kurla Complex. The new headquarters will house almost all of Volkswagen's operations, including auto finance, the used cars business and brands including Volkswagen, Skoda, Audi, Porsche and Lamborghini over a total 105,000 square feet of space.


·         Cipla: One of the largest pharmaceutical companies in the country, Cipla has bought a land parcel in central Mumbai. The office space - about 1.30 lakh square feet at Peninsula Business Park in Lower Parel - is likely to form the company's new headquarters and consolidate all its functions.


·         Huntsman: A global manufacturer and marketer of differentiated chemicals, Huntsman has recently relocated to its newly-acquired space of around 2.4 lakh square feet at Hiranandani Lightfall, Andheri East, Mumbai.


·         Jones Lang LaSalle India: Global real estate services giant Jones Lang LaSalle relocated its Mumbai office to a new WorkSmart environment within Peninsula Business Park, Lower Parel. The new office space - around 14,000 square feet - replaces the previous premises of around 7000 square feet. With this move, Jones Lang LaSalle India has been able to consolidate all its operations in Mumbai into a superior and far more efficient working environment.


·         FIS Global Business Solutions India Pvt. Ltd.: One of the world’s largest global providers of banking and payments technologies, FIS took up 1 lakh square feet of new office space at Guindy in Chennai. The transaction involved relocation from their two existing facilities to a fully fitted-out, standalone facility. The location is one of the best-connected locations in Chennai and the building offers excellent visibility and branding potential.


·         VMC Systems Limited: VMC Systems Limited - an OEM of a range of telecommunications, networking and power conversion products - took up a new fully-furnished office space measuring 3300 square feet in the CBD of Hyderabad for establishing its headquarters.


·         SKS Microfinance Limited: This company took up  80000 square feet of office space in 2009. However, with the changing economic scenario, SKS was evaluating options for relocation to reduce operational costs. The company has managed to achieve this objective by acquiring new space at Kundanbagh, Begumpet in Hyderabad.


·         Ellucian (formerly Datatel): Formed in March 2012 by a merger of Datatel and Sungard Higher Education (SGHE), Ellucian provides technology solutions and strategic guidance to help education institutions navigate change, achieve greater transparency, and drive efficiencies. The company relocated from its old premises to a new office space of around 31820 square feet in the Central Business District of Bangalore. The new office brings together the functions of marketing, sales, engineering, services and support. By co-locating all these departments, Ellucian can reasonably expect to accelerate the rate of delivery of new products and provide better and broader support to its growing customer base in India.

By Santhosh Kumar, CEO - Operations, Jones Lang LaSalle India

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