Upgrading Assets, Key to Changing Tenant Preferences
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, Future proofing 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 BandraKurla 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.”
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.”