Secondary business districts shine

Across most key Indian office markets, secondary business districts (SBDs) are emerging as the new favourites of occupiers due to the availability of larger floor plates and latest amenities that suit most occupiers’ requirements besides offering options in superior grade-A assets to the discerning occupier. 

In the more traditional markets such as Mumbai and Delhi, the SBDs have been seeing more occupiers move in, at the cost of their CBDs. 

Ramesh Nair, CEO & Country Head, JLL India, says, “Central business districts (CBDs) are largely losing out to the SBDs due to lack of project- and precinct-level infrastructure and hardly any new grade-A supply. A look at the supply that is supposed to come in from 2016 to 2020 in these CBDs shows negligible supply in Mumbai, Delhi-NCR and Chennai; and very less supply in Hyderabad and Kolkata.” 

A comparison of the difference between average floor plate sizes across CBDs and SBDs of key Indian cities reveals that Bengaluru has the starkest difference of all. The difference between its two averages is 35,000 sq ft. The difference in Delhi-NCR’s  case is 17,000 sq ft – less than half of Bengaluru’s but still significant enough – and demonstrates the availability of some very large floor plate options in its SBD. Pune follows with a differential of 14,000 sq ft. Mumbai comes next at 10,000 sq ft and is followed by Chennai at 7,000 sq ft and Kolkata at 4,000 sq ft. 

Sanjay Chugh, Founder, Skyline Property Consultants tells us, “Areas such as Guindy, Anna Nagar (West), Ambattur, Mount Poonamallee, Manapakkam, OMR, GST have all emerged as strong Secondary Business Districts in Chennai. The moment the city started expanding, these SBDs started gaining prominence. What’s going for them is the availability of floor space at a cost-effective rate. The buildings in these regions are also newer, and constructed keeping in mind, requirements of today’s offices. The major offtake of commercial real estate is by IT companies who need large floor spaces on a single level. And from the occupier’s point of view -the pricing of commercial spaces in SBDs is much lower, as it the cost of leasing.” 

Another major advantage offered by SBDs is the option to create infrastructure within these zones. Many IT campuses have internal physical infrastructure created by the builders themselves. Chugh says, “In a CBD, this is not really an option. Land parcels in the CBD are smaller as compared to the SBDs and the PBDs (Peripheral Business Districts), located on the outskirts of the city comprising areas like Sholinganallur and Siruseri. Most of the new construction activity taking place is occurring in these SBDs only. Around 20 to 25 per cent of the activity is concentrated on the CBDs whereas the rest of the activity is happening in SBDs and CBDs.” 

What bodes well for the future of these SBDs is that their grade-A universe is set to expand what with real estate investment trusts (REITs) about to launch in the country. “Developers and funds that own many assets across India are expected to refurbish/ upgrade certain buildings in their portfolio into grade-A or superior grade-A assets. With these developments and most periphery business districts still having connectivity issues, most of these SBDs will stand to benefit in the years to come,” sums up Nair.