Cognizant Planning to Sell Key Office Assets in Hyderabad and Chennai

Embracing Asset-Light Model: Cognizant's Real Estate Strategy

Cognizant Technologies, a renowned software services firm, is taking significant steps towards becoming an asset-light company. The firm plans to sell its substantial office assets in Hyderabad and Chennai. This move is part of Cognizant's broader strategy to focus on non-core real estate and streamline its operations.

Divesting Major Campuses: A Cost-Cutting Measure

The divestiture includes a 10-acre campus in Gachibowli, Hyderabad, and a 14-acre campus in Siruseri, Chennai. This decision aligns with Cognizant’s comprehensive cost-cutting restructuring plan, aiming to save $400 million over two years. This includes vacating 11 million square feet of office space, indicative of a significant shift in the company’s operational strategy.

Reassessing Real Estate Portfolio

Cognizant is thoroughly re-evaluating its real estate holdings. This has led to the firm giving up rented properties in some locations while also renegotiating rents and downsizing assets in others. The Hyderabad campus, spanning 2.5 lakh sq. ft. on 10 acres of land, was initially allotted by the government for exclusive use and was later acquired by the company. The Chennai land, leased from SIPCOT, encompasses a 600,000 sq. ft built-up area, housing Cognizant’s largest global facility.

Lease Renegotiation in Hyderabad

Cognizant has also successfully renegotiated its lease agreement for an upcoming property in Hyderabad. Originally leased at 1.5 million sq ft pre-Covid, it has been downsized to 1 million sq ft. The renegotiated rental rate stands at approximately ₹57 per square foot.

Consolidating Spaces Post-PandemicIn April, the US-based multinational gave up 1.15 million square feet of office space in Chennai. This move is part of Cognizant’s global strategy to rationalize workspaces, particularly in India, by redistributing real estate and expanding into Tier 2 cities. This approach aims to simplify business operations, realign the workforce to hybrid work models, and invest in growth opportunities and collaboration spaces in emerging urban centers.

Tech Sector’s Evolving Office Space Dynamics

The broader software and IT sector, facing financial pressures and a need to conserve resources, is witnessing a trend of relinquishing office spaces. Leading tech companies, including Meta, Accenture, Amazon, Microsoft, and Alphabet, have reduced their office footprints globally, affecting their Indian operations. Although the technology sector's share in Indian office space has decreased from 40% in Q2 2022 to 26% in Q2 2023, it remains a dominant player. The vacated demand is being filled by Global Capability Centres, the financial services sector, and engineering companies looking to expand.