Occupiers Drive Demand For Green Office Spaces

Green-certified office space has caught the fancy of occupiers with Bengaluru and Mumbai registering the highest leasing in green-certified buildings.   

With an unwavering focus on sustainable built spaces, occupiers’ preference to lease in green-certified buildings has gained momentum in key office markets across India. According to a recent Colliers report, during Q2 2024, about 13 mn sq ft of office space in the top six cities has been leased in green-certified buildings. This represents a 24 percent YoY increase and accounts for an impressive 82 percent share in overall leasing during the quarter.

This rapid growth is an indication of the rising awareness amongst corporate occupiers to the role that built structures have to play in containing issues related to climate change through reducing carbon footprint. The share of Bengaluru followed by Mumbai remained significant, together accounting for over 50 percent of the leases in green-certified buildings in Q2 2024. Interestingly, of the 13 mn sq ft of leases signed in green buildings, about 60 percent were in relatively newer developments which have come in the last 5 years.

Currently, LEED, GRIHA and WELL are some of the prominent green certifications available in the Indian market, which validate buildings as ‘green’ by assessing various parameters including energy consumption, waste generation and alignment of design with health and wellness aspects. Real estate developers are increasingly aligning their offerings with global sustainability standards, simultaneously presenting various tangible benefits to their tenants including lower operational costs, improved indoor air quality and enhanced employee productivity. 

Trend of leasing in green-certified buildings (Q1 2023 – Q2 2024)

Source: Colliers

Notes: Data pertains to Grade A stock; Gross leasing does not include lease renewals, pre-commitments and deals where only a letter of Intent has been signed; Top 6 cities include Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai, and Pune 

Technology and Engineering & Manufacturing Companies at the Forefront

About 80 percent of leasing by technology and engineering & manufacturing firms since 2023 were in green-certified buildings. Moreover, it is noteworthy that 62 percent of the flex players prefer space take-up in green-certified buildings. Overall, at an India level, technology sector accounted for about 27 percent  share in the cumulative space take up in green-certified buildings since 2023, followed by occupiers from Engineering & Manufacturing and BFSI sectors with about 19% share each.

City-wise leasing in green buildings (Q1 2023 – Q2 2024)

Source: Colliers

*On the basis of % of leasing green-certified buildings for the specific city in a particular sector in Q1 2023-Q2 2024

Notes: Data pertains to Grade A stock; Gross leasing does not include lease renewals, pre-commitments and deals where only a letter of Intent has been signed

“Over the last few quarters, developers, investors & occupiers in the office market have increasingly embraced adoption of sustainable elements in their portfolios.  Since 2023, about 70-80% of the space uptake by Engineering & Manufacturing, Technology and BFSI players has been in green-certified buildings. The trend is expected to further accelerate in the next few years. Moreover, SEBI’s mandatory sustainability reporting further provides a thrust to occupiers, investors and developers to increasingly consider green portfolios while meeting their ESG targets, “says Arpit Mehrotra, Managing Director, Office Services, India, Colliers.

Rising Grade A Green Certified Office Stock

In tandem with the rise in demand for green-certified buildings, green building stock is also seeing an increase. According to Colliers, as of June 2024, about 67 percent of the Grade A office buildings across the top six cities were green-certified. Bengaluru and Delhi NCR account for about half of the green office stock in the country.  Of the 13.2 mn sq ft of new Grade A office completions in Q2 2024, almost 70 percent are green-certified. In the next two to three years, the majority of the over 150 mn sq ft Grade A office developments in various stages of construction across the six major cities are likely to be green certified, expanding Grade A green stock to over 600 mn sq ft.

Trends in new supply of green-certified buildings (Q1 2023 – Q2 2024)

Source: Colliers

Notes: Data pertains to Grade A stock; Top 6 cities include Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai, and Pune

“With increased inclination amongst occupiers for green-certified buildings, several Grade A developers are increasing sustainable offerings in their commercial portfolios. During the second quarter of 2024, almost 70 percent of the new supply was green-certified. With growing demand, developers are also retrofitting ageing office stock and incorporating sustainable elements in overall building design & construction. About 300-350 mn sq ft of commercial building stock older than 10 years hold the potential to get refurbished in the next few years and add to the green-certified office stock of the country.” says Vimal Nadar, Senior Director and Head of Research, Colliers India

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