IBM Secures Presence in Bengaluru with INR 143 Crore Annual Lease Renewal at Embassy REIT Property

Summary:

IBM renews its lease for 830,000 sq ft at Embassy Golf Links in Bengaluru with an annual rental of ₹143 crore.

The 10-year lease includes provisions for 12% and 15% rental escalations after 5 and 8 years, respectively.

Embassy REIT leased 1.9 million sq ft of office space in Q1 FY2024, with IBM contributing 7% to its rental revenue.

IBM holds approximately 10 million sq ft of leased office space across key Indian cities, employing around 100,000 people.

India’s office space market saw a 19% YoY increase in leasing in H1 2024, driven by technology, engineering, and manufacturing sectors.

Details:

IBM has reaffirmed its commitment to Bengaluru by renewing its lease for approximately 830,000 square feet of office space at Embassy Golf Links Business Park. The deal, which involves an annual rental of ₹143 crore, ranks as one of the largest single transactions in the commercial office space segment this year. This move is expected to solidify the US-based technology giant’s presence in one of India’s key business markets, according to sources familiar with the matter.

Long-Term Commitment:

The lease agreement spans 10 years, with provisions for a 12% rental escalation after five years and a 15% escalation after eight years. The monthly rental rate is set at ₹140 per square foot, as detailed in a lease document shared by data analytics firm Propstack. Embassy REIT, the owner of the property, has not commented on the transaction.

Embassy REIT’s Robust Performance:

Embassy REIT, India’s first publicly listed real estate investment trust, leased approximately 1.9 million square feet of office space across 22 deals in the first quarter of this financial year. Global capability centers have been the primary drivers of demand, accounting for 70% of the leasing activity. IBM, one of Embassy REIT's largest tenants, contributes nearly 7% to its rental revenue.

IBM's Strategic Expansion:

IBM's real estate footprint in India is significant, with about 10 million square feet of leased space across key cities like Bengaluru, Hyderabad, Noida, Gurugram, and Kolkata. The technology company employs around 100,000 people in India, constituting roughly one-third of its global workforce. This lease renewal is part of IBM's broader strategy to maintain a strong presence in India's commercial real estate market.

Resilient Office Space Market:

The country’s office space market has shown resilience, with leasing activity growing by 19% year-on-year in the first half of 2024, reaching 29.4 million square feet across the top six cities. This trend highlights strong occupier confidence and favorable market conditions, as reported by professional services company Colliers. The technology, engineering, and manufacturing sectors collectively drove about half the demand in the second quarter of the year.

Conclusion:

India’s top office properties in prime city center locations, such as those in Mumbai, Delhi-NCR, and Bengaluru, continue to command premium rentals. These properties are distinguished by state-of-the-art amenities, low vacancy rates, and sustainable green certifications, making them highly attractive to corporate tenants. These high-quality work environments meet global standards and offer superior infrastructure, contributing to strong rental values in India’s commercial real estate market.