As many as 28 percent of old Grade A office buildings spread across Mumbai, Delhi NCR and Bengaluru present an investment opportunity worth Rs 5,500 crore if these are upgraded with modern amenities, designs and building technology, a report by JLL has said.
Half of investment properties in prime locations in Asia Pacific are over 20 years old, leading the real estate firm to forecast that there is over $40 billion worth of unrealised value in aging and underperforming properties regionally.
Of the existing 642 million sq. ft. of Grade A office space in the top seven real estate markets in India, the top three -- Mumbai, Delhi NCR and Bengaluru -- comprise nearly 64 percent of the total stock, the report titled Unlocking Value in Real Estate has said.
As many as 28 percent of these buildings are more than a decade old, sans the latest facilities that newer buildings offer. Upgrading these buildings with modern amenities, designs and building technology presents a massive investment opportunity of an estimated Rs 5,500 crore, it said.
Without asset enhancement, offices, shopping malls, hotels, residential buildings and industrial facilities will lose relevance due to evolving end-user habits and preferences, it said.
JLL’s research reveals that rental rates for aged and outdated buildings are 10 percent to 40 percent lower than up-to-date, well-managed properties in similar locations. This marked difference in rates may also increase as newer post-pandemic designed buildings enter the market.
“The current pandemic situation has brought out a key change in workers’ expectations in terms of workplace safety and amenities. In this new world of work, the existing buildings might not yield the same value as before the pandemic,” said Harish MV, Managing Director and Head, Project & Development Services, JLL.
“In a rapidly transforming real estate landscape, asset enhancement helps buildings to perform at their best and ensures that they evolve at the same pace as human preferences. While age of the building is one of the measures for identifying the need and potential of upgradation, we will also witness a trend of newer buildings undergoing or planning for development to keep up with the evolving trends in the market,” he said.
Older buildings’ energy and maintenance systems are often less efficient, leading to increased operating costs, making a strong case for investors and landlords to reconsider design and asset enhancement strategies for ageing properties.