Noida strong competitor to Gurgaon in commercial realty

Move over Gurgaon. In the last calendar year, Noida emerged as Delhi NCR’s prime commercial real estate (CRE) destination in net office space absorption, outpacing its bigger rival. Experts predict that in 2021 and beyond, the competition between the two micro markets will only intensify.

Noida is fast shedding its image as Gurgaon’s poor cousin in terms of attracting corporates. With its efficient road and metro connectivity, affordable housing, abundant power, availability of Grade-A office space, competitive rentals and upcoming international airport and logistics hub, it’s becoming more attractive by the day. It is also emerging as a prime location for setting up data centres in north India.

According to JLL India, Noida outpaced Gurgaon for three consecutive quarters since Q2 2020. In 2020, it accounted for around 1.78 million sq ft (MSF) of net office space absorption, against Gurgaon’s 1.40 MSF. Net absorption is fresh leasing in existing buildings, plus pre-commitments in buildings that are getting operational in the particular quarter and deducting exits/ terminations. It excludes churn deals, renewals and pre-commitments in future supply.

JLL managing director (north & east India) Manish Aggarwal said, “There is huge cost arbitrage when compared to other such office assets in NCR.

Rentals in these fine office assets are at least 40% lower when compared to their peers across NCR.” Noida witnessed a couple of large deals in the last 9-10 months, he said, adding that for instance Paytm leased around 5.20 LSF, Microsoft leased 1.50 lakh sq ft (LSF) and Yes Bank around 70,000 sq ft. Such transactions propelled the growth of quality office space.

“Noida this year will have at least 2 MSF of quality graded supply, which can be compared to the best in NCR. Most of the new office assets offered have either Leed Gold or Platinum rating like Max Towers, Berger Towers, Sky Mark and a new building by BPTP and yet they are cost effective and at unbeatable locations with close access to metro and best of infrastructure,” Aggarwal added.

Industry veteran and former JLL India CEO Ramesh Nair agrees. “When you provide good quality infrastructure and create good quality supply, tenants prioritise expansion in that city over others. We saw that in Hyderabad. And I think Noida is a very similar example. You saw some good quality supply coming in the market and you saw some massive deals like Paytm and Yes Bank. This is what is driving demand,” he added.

Nair pointed out that the biggest challenge with Gurgaon is availability of high quality office supply coming in at regular intervals. “As an occupier you cannot wait years for space to come. You need space coming up every 3-6 months,” he said.

Max Ventures and Industries (MaxVIL) chief business development officer Rishi Raj said rest of Gurgaon (excluding central business district) and Noida Expressway will be on the corporate radar as they boast of $1 rentals (Rs 70-75 per sq ft per month), a crucial deciding factor.

“Good quality supply creates good demand and Noida has a growing supply of good quality developer-owned and developer-operated Grade-A office space with competitive rentals, which is attracting corporate,” he noted.

BPTP head of sales Amit Raj Jain said, “During Covid real estate cost was the biggest expense which was pinching corporates. Noida provides a solution to corporate who want to bring down their real estate cost, without compromising on facilities and amenities.”

However, this does not mean that Gurgaon’s potential is going down, countered JLL’s Aggarwal, adding that last year the city had a fair bit of large transactions, but these were more or less re-locations and fewer expansions which affected net absorption.

MaxVIL’s Rishi Raj agreed. He said it is not as if Gurgaon will play a second fiddle to Noida in NCR, but both will be competing fiercely. “But Gurgaon needs to invest in infrastructure like checking water logging during monsoons. Also Noida will have to keep on adding good quality office supply,” he suggested.