New Business Hubs to Boost Grade-A Office Space by 89 Million Sq Ft in Top Indian Cities

New business hubs are expected to add approximately 89 million square feet to the Grade-A office space in the top seven cities over the next five years, according to JLL data. These emerging business areas are anticipated to have significant effects on the broader economy and the real estate market in India.

The impact extends beyond commercial properties, influencing the residential sector as well.

According to industry experts, various elements are contributing to the rise of new commercial areas. Prashant Sharma, president of NAREDCO Maharashtra, highlights several key factors. Firstly, the increasing need for modern, tech-equipped office spaces is a direct result of the growth in digitalisation and the expansion of the IT sector.

Secondly, India's flourishing start-up ecosystem is fostering a demand for flexible co-working spaces tailored to these innovative businesses. Lastly, the influx of foreign direct investment (FDI) into the commercial real estate sector is providing essential capital for the development of these emerging business hubs.

Vivek Rathi, the National Director of Research at Knight Frank India, notes that significant economic activity, favourable government policies, and transit-oriented infrastructure spur the growth of new commercial clusters in major cities, in addition to the Central Business District (CBD).

These clusters emerge due to factors such as talent availability, rental costs, and the quality and scale of office spaces in suburban and peripheral regions. Over the past decade, the resilience of the Indian economy and subsequent business expansion in major cities have driven the demand for commercial real estate in emerging business districts, attracting both large corporations and small businesses from various industries.

The landscape of commercial real estate is evolving, influenced by several supportive factors such as cost efficiency, changes in work models, and land availability. According to Anuj Puri, chairman of Anarock Group, the benefits include:

Cost Efficiency: Traditional central business districts (CBDs) often come with high rental rates. Emerging areas provide businesses with the chance to lease fully equipped office spaces at more affordable prices.

Changing Work Models: With the rise of hybrid work models, businesses are considering decentralised workspaces in new business districts.

Modern Infrastructure: These new business hotspots often feature better connectivity through well-developed road networks, metro lines, or proximity to airports.

Government Initiatives: Infrastructure projects like metro rail, expressways, and ring roads are creating new growth corridors outside traditional CBDs.

Land Availability: Established CBDs often have limited land, leading to high prices. Emerging hotspots offer ample land for Grade-A office spaces with integrated amenities, creating a live-work-play environment that attracts talent.

Employee satisfaction is another critical factor. Gagan Randev, executive director of India Sotheby's International Realty, notes the significant changes in work preferences post-pandemic.

He explains, “Traditional office areas are becoming saturated with traffic and limited new spaces. After the pandemic, employers recognise the importance of employee input on office location. Employees prefer shorter commutes and amenities for socialising and dining.”

Implications for Commercial Real Estate

Sharma highlights the impact on commercial real estate, stating, “There will be a significant increase in Grade-A office supply, meeting the demand from multinational corporations and domestic companies for premium office spaces. This surge in supply is likely to stimulate job creation and attract more foreign and domestic investment into the cities.

Rental yields could see an upward trajectory in these hotspots due to increased demand. Additionally, the development of these hotspots is poised to enhance the infrastructure and connectivity in the surrounding areas, potentially increasing their value and appeal to businesses.”