SBDs (Secondary Business Districts) are fast becoming major favorites for companies and offices across almost all major office markets in the country. This is attributed to better availability of bigger floor plates in tandem with required infrastructure, which suits the needs of these organizations. Also, this offers options for companies in premium A-grade assets that come with enhanced amenities.
In more conventional office markets like Delhi and Mumbai, companies are preferring SBDs over than Central Business Districts. For example, Bank of America recently shifted from the CBD in Mumbai to the SBD at Bandra-Kurla Complex while Philip Morris and Bank of Tokyo shifted from the CBD in New Delhi to the SBD. CBDs are losing out to SBDs on account of the absence of precinct and project based infrastructure and limited grade-A space supply. The future looks bright for SBDs since the grade-A segment will witness major expansion with REITs, which are due to be launched in India according to the CEO at JLL India, Ramesh Nair.
According to Nair, the supply is expected to be available between 2016-2020 in CBDs has minimal and often negligible additions, particularly in markets like Chennai, Mumbai and Delhi-NCR and there is little supply available in Kolkata and Hyderabad. However, the supply in Pune has witnessed less than 0.5 million sq. ft. in new office stocks. Bangalore is the only major market, which should have supply of approximately 2 million sq ft. in the CBD.
Institutional investors have also started considering SBDs as favorable investment avenues. Even Milestone Capital Advisors, a private equity firm, recently acquired office space at The Capital Building and has swiftly leased the same to a co-working space provider. Businesses are swiftly shifting to the Bandra-Kurla Complex (BKC) and this may lead to higher rentals going forward according to the executive vice-chairman at Milestone Capital Advisors, Rubi Arya. Arya also added that this market may outstrip the previous highs in terms of rental and capital values. Several corporations are also setting up front-office operations in SBDs and shifting their back-office operations to suburban markets with lack of interest in traditional CBDs.
According to the Managing Director at Bharti Realty, SK Sayal, better infrastructure, connectivity and security are the major factors propelling the SBDs and newly-built complexes over their traditional counterparts. Bharti Realty has developed Worldmark at the Aerocity in New Delhi and with the easy access to the International Airport, city centre and Millennium City, the developer has already leased out 85% of the total office space to several big MNCs including Mitsubishi, Bank of Tokyo, OCS and Sumitomo among others.
Developers are expected to refurbish and upgrade office spaces in their portfolios in the near future, going by the recent market trends.
