- Colliers estimates that landlords and developers have a scope to upgrade around 100 mn sq ft* (9 mn sq m) of office space in the top six cities accounting for 14% of the existing stock.
- Upgradation ought to help landlords by boosting up the rents by up to 20% across the six cities.
- Colliers estimates that retrofitting outdated stock in the top six cities holds an investment potential of INR9,000 crore* (USD1.2 billion).
- As per Colliers, Central Business Districts (CBDs) have the highest proportion of outdated stock, accounting for 60% of the total CBD stock in the top six cities.
- Integrating energy efficient components in HVAC system, electrical and plumbing fixtures, and external facade upgradation are some important aspects that landlords can look into while retrofitting which can enhance the operational efficiency.
Landlords and developers are missing investment opportunities and have a scope to upgrade around 100 million sq ft of office space. The retrofitting of these assets has INR 9,000crore worth of unrealised value in the top six cities as per Colliers’ latest report, Revitalizing outdated buildings: A requisite to avoid redundancy.
As per the report, the upgradation of buildings will make them more investible, which investors and developers can then bundle into a REIT. Currently, investors are betting on under-construction buildings due to a lack of readily investible assets.
“This is an opportune time for landlords to upgrade their properties. Many occupiers are considering moving from old-generation to new-generation buildings and, more than ever before, looking at aspects like HVAC upgrades, improved indoor air quality standards and smart features. The focus is also on modern amenities which improve operational efficiency and enable collaboration. Occupiers are also looking at a reduced CAPEX from their side. In this context, retrofitting buildings will revive demand by generating a renewed sense of interest among occupiers. While up-gradatioCEO India & MD, Market Development, at Colliers India.
The report mentioned that Occupiers’ needs, and preferences are changing. This makes it imperative for outdated office buildings to be upgraded. Occupiers are increasingly exploring smart buildings with modern amenities that improve operational efficiency and enable collaboration. Moreover, COVID-19 has brought the health and safety of employees to the centre stage. As employees gradually return to the workplace, workspaces will need to meet the expectations of the new normal.
According to Colliers, CBDs of the top Indian cities such as Nariman Point in Mumbai, Connaught Place in Delhi, and MG Road in Bengaluru are iconic. They have played an enormous role in the growth of these cities. However, About 60% of the total CBD stock of the top six towns require upgradation. Tapping into this potential will be a good investment opportunity for developers and investors.
Bengaluru, Delhi-NCR and Mumbai together account for about 75% of the total stock ready for upgradation. Mumbai has the highest potential, with 28 mn sq ft of obsolete inventory. In the NCR, Delhi leads for upgradation in the CBD, Nehru Place and Okhla micro-markets where up to 49% of the stock is outdated.
“Energy retrofitting, technology integration and design are some vital elements for retrofitting. Tech-enabled air distribution systems, innovative glass technology, double glazing to cut energy requirements are some essential aspects that landlords can look into while retrofitting. Well-being focused design elements like increased natural lighting and ventilation, and occupiers will increasingly prefer integrated outdoor spaces, says Argenio Antao, Chief Operating Officer, India.
The report mentioned, upgrading these buildings with modern amenities, designs, and building technology will not only attract massive investment opportunities but also command higher rentals and global companies. Occupiers will also be inclined towards upgraded buildings further led by the prominence of location, robust public transport, and low new supply in these markets.
Case Study:
A major multinational technology company is planning to upgrade its offices to increase hygiene and wellness for employees amidst Covid, while improving security and reducing energy consumption. The upgrading project is incorporating additional technology and modern sensor-based equipment. Installation of thermofusers with integrated thermostats more accurately control air movement in enclosed areas, while blower fans will be replaced by more efficient electronically commutated (EC) fans.
High efficiency plumbing fixtures reduce resource pressure while touchless access control systems like foot operated door openers and thermal cameras at entry points improve security and access. All this information will be fed into the building management system (BMS) for real time integration and management. The overhaul is likely to improve operational efficiency and ensure safety and well-being of employees.