While India’s office market remains a strong global performer, it also needs to keep pace with the rapidly-evolving sustainability standards, occupier demands, and regulatory requirements. The office market across the top seven cities offers an estimated Rs 45,000 crore (approximately USD 5.3 billion) opportunity in retrofitting (improving the existing building design and engineering, integrating new technology, enhancing user experience, and incorporating climate-adaptive features and capabilities) and upgrading existing buildings.
According to the JLL report ‘Futureproofing 4.0: Opportunity through obsolescence’, approximately 62% of India’s Grade A office stock across top seven cities, equivalent to 530.8 million sq. ft, requires upgrades – spanning from light to moderate to deep interventions. This presents both a challenge and an unprecedented opportunity for stakeholders across the industry. The focus of this transformation opportunity is primarily headlined by four key markets – Bengaluru, Delhi NCR, Mumbai, and Hyderabad – which account for about 81% of the total capex spend. These four markets also represent about 75% of occupier activity in the country and thus need critical developer and investor interventions to keep office assets ‘relevant’.
The report observes that the definition of retrofits has undergone a shift across the entire paradigm of property attributes. This comes as no surprise amid the soaring demands from tenants for ‘quality’ assets as they move on from ‘commodity’ assets. This shift will keep investors and landlords on their toes as they seek to create higher quality, low-carbon, sustainable, and resilient buildings in a bid to remain relevant and adhere to evolving emission and benchmarking mandates.
Also Read: SWP in Mutual Funds: How senior citizens can benefit from regular withdrawals
“India’s commercial real estate sector is at a pivotal moment, with an estimated Rs 45,000 crore opportunity in retrofitting across 530.8 million sq. ft of office stock. Around 32% of India’s office stock was built earlier than or in the first decade of the new millennium. Even assets built later but prior to 2020 need to look at upgradation considering what tenants need today, given the changing dynamics around the need for offices to become ‘experiential’, fulfilling the twin objective of being modern (agile, tech-driven, amenity-rich) and sustainable/low-carbon. Post-retrofit rental premiums offer tangible returns, while improved occupancy rates and longer lease terms further enhance the per-square-foot value of assets. By investing in these retrofits, property owners can expect rental premiums of 15-30%, with some prime locations seeing increases of up to 50%,” said Dr Samantak Das, Chief Economist and Head of Research and REIS, India, JLL.
Successfully upgraded assets stand to benefit significantly, with potential rental premiums of 15-30% compared to non-retrofitted buildings. In some prime locations, such as Mumbai’s SBD BKC and Western Suburbs, these premiums could soar even higher, reaching an impressive 40-50%.
Commenting on the report, Ashish Agrawal, Co-Founder, Enzyme Office Spaces, said, “When it comes to Grade-A office spaces in India, 62% of them need retrofitting as per industry reports. This presents great opportunities for co-working spaces, especially in citiies like Bengaluru and Mumbai. Nowadays, businesses require flexible and modern sustainable workspaces. Retrofitting older buildings allows for enhanced locations that have better designs and technology which helps meet the demand for experience-driven quality offices. With hybrid work becoming a norm, co-working spaces in retrofitted buildings will be instrumental in defining the work culture in India.”
Aman Gupta, Director of RPS Group, said, “India’s commercial real estate would experience a major shift and advancement with the increase in retrofitting old structures in upgradable office spaces. The scale of these number is observed as overly ambitious, but the value of modern office spaces that are energy-efficient and tech integrated is crucial. Not every building may require deep intervention, but moderate upgrades can significantly enhance asset value. With occupants changing their priorities to require quality over quantity, investing in future office spaces will determine the next improvement in the region.”