India’s commercial office sector has been on an unprecedented growth curve over the past few years and the result has been its commercial Grade A stock having doubled over the past eight years. The gross space take-up also breached previous highs to be at an all-time high of 48 million square feet (msf) in 2018.
At the heart of the commercial markets’ development have been the city business districts and secondary business corridors which have been shaping the contours of office markets in each of the cities. In fact, urbanisation has brought in its wake a constant expanding of the city boundaries with newer areas coming under development. This trend has also given rise to new office corridors which have thrived due to enhanced connectivity and availability of lands, which allow for future growth and scalability. Not to mention that new office corridors are also more affordably priced than the core markets.
As cities and office markets are re-shaped by the upcoming commercial supply, some interesting trends are emerging in core markets:
- Core markets in most cities are adding new supply on limited land parcels available. These projects can attract a substantial rent premium as they are virtually cresting the rent growth seen by these markets.
- Land usage patterns and connectivity parameters have also seen cities re-do their masterplans to allow for higher floor area ratio (FAR) in core office markets with multi-modal connectivity. This is also giving a new lease of life to such core markets.
- With the core markets’ performance being a given, many older projects are being refurbished and retro-fitted to create new-age buildings in scantily supplied office markets.
From an occupier perspective, while core markets with their established infrastructure offer the right mix of a landmark address and well-settled support amenities, scalability in such markets at times may be a challenge if new supply is not being added.
In this context, new growth corridors tend to be looked at more favourably. These may include those which have shown healthy short-term performance indicators or those which may be considered potential hotspots from a long-term growth perspective. All Indian cities today have such hotspots which are emerging due to their proximity to the existing core markets, improved connectivity enablers and office supply. These hotspots offer the right mix of affordability, quality and scalability for occupiers to consider such locations for long-term business planning.
In Cushman & Wakefield’s Occupiers’ Compass: New Locations in Focus report, six such future locations in India were identified as emerging commercial hotspots that have the potential to give a new wave of growth impetus to the major commercial cities. This in no way takes away the growth that the core markets continue to drive in their respective cities.
We provide an overview of such emerging corridors and drivers that make them a potential destination for occupiers.
- Golf Course Extension Road (Gurugram)
- Rental advantage: Cost benefits with rents for Grade A properties in this corridor almost half the comparable rents in the core office market
- Adequate space availability for large contiguous floor plates in both existing as well as upcoming office projects, making the market tenant favourable for the immediate future.
- Well-planned infrastructure:
- Last mile connectivity due to proximity to the rapid metro network; accessibility to all prominent residential and retail locations in Gurugram.
- 16-lane expressway connecting DLF Cybercity all along the Golf Course Road which further connects to this corridor, offering seamless road connectivity.
- Close to 25,000 residential units, both existing as well as in various stages of construction with an average price range of INR 8,000-8,500 psf.
Immediate Competition – DLF adding substantial office supply in proximity to the well-established DLF Cybercity corridor where infrastructure is best-in-class.
- ORR (Gachibowli Flyover towards Kokapet) (Hyderabad)
- Part of the Gachibowli office market which has established itself as a viable alternative to the Hitec City office corridor.
- Upcoming supply: Robust supply pipeline of 6.5 msf of Grade A office space to drive occupier interest in the region.
- Rental arbitrage: Significant rental benefits for Grade A properties in comparison to the core market of Madhapur / Hitec City.
- Well-planned physical & social infrastructure:
- Connectivity to the airport via Outer Ring Road (Airport connector).
- Presence of radial roads aids proximity to all prominent residential corridors and social amenities.
- Residential developments in the area backed by robust demand from the IT sector. Around 2,300 units in various stages of construction in the price range of INR 3,700-6,000 psf.
Immediate Competition – The key market of Hitec City/Madhapur is adding a heavy supply pipeline in the next three years which may delay the growth of the corridor.
- Extended Kharadi – Wagholi Nagar Road Belt (Pune)
- Availability of Grade A office supply – growth corridor in eastern part of the city. Offers favourable ecosystem for tenants with presence of adequate Grade A offices. More than 2 msf of development pipeline in the Wagholi node, 2-3 km from the current development axis.
- Rental advantage of 10-15% in the emerging node compared to core Kharadi.
- Locational advantages: Proximity to the International Airport and well-connected to the city through multiple access nodes from Nagar-Wagholi road.
- Infrastructure development:
- The under-construction projects like Kharadi-Shivane, Mula-Mutha Riverside Road to ease traffic bottlenecks in the area.
- Convenient access to social infrastructure – malls, schools, hospitals and retail destinations.
- Livability factor: Strong residential growth backed by robust demand from the IT sector.
- The residential pricing ranges from INR 6,000-7,000 psf.
Immediate Competition – Continued demand in the existing core markets of Hadapsar and Kharadi which is being well-supported by upcoming supply.
- Bellary Road (Bengaluru)
- Location Drivers
- The stretch is an upcoming area led by its proximity to the airport.
- Connected to the rest of the city via Outer Ring Road, signal free flyover from Mekhri circle till the airport.
- Proposed metro line from Nagawara till the airport further makes this location attractive for future growth.
- Developed social infrastructure with presence of several top schools and key hospitals.
Immediate Competition – The core office market of ORR continues to be favoured by occupiers due to the presence of quality IT Parks and new projects (nearly 45-50% of new supply) shall continue to bolster the demand story. Also, the completion of the Metro shall allow the Whitefield office corridor to regain momentum.
- Thane-Belapur Road (Mumbai)
- Rental advantage:
- Facilitating rental arbitrage with Grade A office spaces available at less than USD 1/sf/month.
- INR 50-55 psf pm in comparison to INR 100-120 psf pm in other key markets (Andheri-Kurla Road, Powai and Malad / Goregaon) within the city.
- Adequate space availability
- Large contiguous floor plates in both existing as well as upcoming office projects.
- Rentals are slated to increase from the current levels, thus an opportune moment to enter the market.
- Robust infrastructure:
- Upcoming international airport, Navi Mumbai metro, suburban rail extension and Nhava Sheva sea-link connecting JNPT and Sewri in South Mumbai to enhance connectivity.
- Availability of ample housing options at relatively lower prices (INR 6,000-9,000 psf) than established markets in the vicinity, mainly in the affordable and mid segments.
Immediate Competition – addition of supply in Western Suburbs (Malad, Goregaon) along the Western Express highway and new supply in the Eastern corridor may pose some competition to this office market.
- Pallavaram Thoraipakkam Road (Chennai)
- Strategic location:
- Strategically located amidst the GST and Old Mahabalipuram Road (OMR), the stretch attracts occupiers from IT/BPM and Manufacturing sectors in both existing as well as upcoming office projects, making it a sought-after office corridor in the Peripheral South region.
- Well-planned infrastructure:
- 200 ft Pallavaran Thoraipakkam Roadconnects the IT/BPM corridor of OMR, at Thoraipakkam and GST Road at Pallavaram.
- Proximity to the airport and connectivity to prominent residential catchments, presence of retail component in the abutting areas are factors in favor of this emerging office hub.
- Prominent residential developers are coming up with their projects along the Pallavaram Thoraipakkam Road, priced in the range of INR 4,950-5,950/sf.
Immediate Competition – The core markets of Guindy and pre-toll OMR are witnessing upcoming supply additions and these are expected to find greater favour from tenants. Lack of supply in core markets with low vacancy environment was pushing demand downwards and that is likely to improve with the supply in these corridors.
While we can continue to see a re-inventing of the core office corridors in the major commercial cities, the emerging corridors shall play an important role in expanding the commercial market breadth in these cities.