-Of the total existing office and retail stock in India, Mumbai and Delhi-NCR have ~24% and ~29% stock respectively, that is a decade old
-More than 30 mn sq ft of new office supply gets added every year in top seven cities in India
-With changing preferences and expectations of employees, the ageing, existing stock stands at a risk of becoming obsolete driving vacancies higher and rentals lower
As decades-old office buildings age, tenants are showing an increasing preference for shifting to new-age office buildings coming up in newly developed business districts, says JLL’s latest whitepaper, Futureproofing Assets in an Evolving Market: Investors’ Perspective, released today.
According to the whitepaper, a healthy rate of Grade-A office stock is being created every year in the country. At the same time, a significant share of office assets, created more than a decade back, are at the risk of becoming redundant. In Mumbai, the quantum of existing Grade-A office stock that was completed 10-years ago (before 2008) stands at 28.8 million sq. ft., which is 1/4th of office stock universe in Mumbai currently. In terms of number of buildings, this universe is a whopping 40% of the total universe in Mumbai. Delhi-NCR has until now witnessed a similar trend, Bangalore and Hyderabad are fast catching up on this trend as well
The study also indicates that tenants are moving from traditional Central Business Districts (CBDs) like Connaught Place in Delhi and Nariman Point in Mumbai to emerging alternate new business districts in Gurgaon and Bandra Kurla Complex, respectively. As a result, with rising vacancies, rentals across CBDs have been witnessing a decline.
MV Harish, Managing Director, Project & Development Services, JLL India said, “The emergence of modern offices is taking occupiers to newly developed business districts and buildings, resulting in a price and occupancy drop in more central, prime markets.”
He added, “Therein lies an opportunity to transform old buildings and futureproof ageing assets from a rental and occupancy perspective. In this day and age, upgradation is no longer an aspiration but a way to survive redundancy. Developers and investors, who own commercial assets will find upgradation very useful and we see this as becoming a niche professional service in the near future.”
Aditya Desai, Head, Developer, Education and Investor Services, Project & Development Services, JLL India said, “Over the last few years, we have seen rapidly changing preferences of employees and tenants. The shelf life of commercial buildings, typically around 30 to 40 years, is most important to landlords. This will soon start to lose its importance and what will appeal is an active Building Life Cycle Management that takes into account upgradation as a key feature to accommodate changing preferences.”
He added, “It is extremely important to drive innovation in design, aesthetics and structure to ensure authentic experiences are delivered and commercial assets are kept from becoming redundant. At JLL we deliver exceptional asset upgradation services to our clients, breathing life in old commercial assets and creating spaces that work for your culture, people and community.”