MUMBAI: The top three real estate markets in India have 379 million sq. ft. of Grade A office space with nearly 105 million sq. ft. being a decade old. The older stock faces the risk of relatively higher attrition of occupiers and lower rents say the findings of JLL’s report titled “Futureproofing 2.0 – Upgrading commercial assets to create lasting value,” released today.
More than 20 million sq. ft. of new commercial office supply is added every year in the top three markets of Mumbai, Delhi NCR, and Bengaluru, where the new supply comes with greater operational efficiency and better human experience, pushing the older stock to the brink of obsolescence.
“Often, this trend can even reduce the attractiveness of entire submarkets, as in the case of the traditional Central Business Districts (CBDs) of the three cities under study. With limited land parcels restricting new development, finding relevant supply in these primary business districts is proving to be a challenge,” the report adds.
These three markets represent a huge investment opportunity from the upgradation of office spaces, highlights the report.
“In this era of change, the defining characteristic of today’s workplaces is continuous innovation. With a diverse working population spanning from baby boomers to “Gen Zs”, it is time to futureproof commercial spaces to meet the emerging needs of a demanding workforce as well as deliver on the community’s sustainability promise,” said Ramesh Nair, CEO & Country Head, JLL. “In addition, these urban regeneration and revitalization projects go a long way in rebuilding a city’s urban character,” Ramesh added.
The need to refurbish office properties presents a massive opportunity, spelling a potential investment of INR 5,500 crore for upgrading aging assets by future-proofing them from the relatively low rental and occupancy levels, with modern amenities, designs, and building technology.
“With so much at stake, upgradation is no longer aspirational. It is fast becoming a necessity to survive redundancy. For asset owners, upgradation based on user preferences and technology infusion will be a critical element in a building’s lifecycle management in the near future. The question is no longer ‘if’ we should but ‘how soon’ can we do this,” said Harish MV, Managing Director & Head, PDS (Project and Development Services), JLL.
In a rapidly transforming real estate landscape, upgradation showcases buildings at their best and ensures that they evolve at the same pace as human preferences. With workforce requirements changing at a rapid pace, every building that is planned will have to follow an active building lifecycle management and take into account upgradation of the asset to keep it relevant in the market.
While the age of the building is one of the measures for identifying the need and potential of upgradation, increasingly we will witness a trend of newer buildings also undergoing or planning for upgradation to keep up with evolving trends in the market.
Upgradation of a building includes components like human experience, technology, sustainability, safety, and security as well as operational efficiency. “However, the relative importance of these components, the quantum of investment required and the rental escalation that can be achieved vary across cities and submarkets,” the report notes.
The report further deep dives into the upgradation potential of prime office districts across the top three cities of Mumbai, Bengaluru and Delhi NCR.
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