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Green real estate assets have grown strongly over the past decade with a share in the total office stock rising to 31% in 2021. Also, the certified stock jumped significantly with a CAGR of 10.7%. These are growth from the top six cities in India (NCR, Mumbai, Pune, Hyderabad, Bangalore, and Chennai).
CBRE in its research report titled "Indian Real Estate's ESG Landscape And Its Progress To A Sustainable Future", highlighted that over the past decade, green real estate assets have grown tremendously, with their share in the total office stock increasing from 24% in 2011 to 31% in 2021. Certified stock
has also increased substantially, growing at a CAGR of 10.7%, compared to 7.7% for overall stock, since 2011.
"Certified green office stock grew by 177% to 212 million square feet in Q3 2021 from under 80 million square feet in 2011," the CBRE note added.
According to CBRE's report, the past five years saw a pronounced push towards green buildings; the period saw a 37% increase in the supply of certified buildings, with the addition of ~ 78 million square feet of certified stock, when compared with the previous five years (2012-2016).
CBRE's note said, "This indicates that the Indian real estate sector is becoming more aware of its responsibility towards ESG principles and moving rapidly towards imbibing sustainability in its assets."
CBRE's analysis reveals that NCR and Bangalore are ahead of the curve and together account for ~ 54% of the total certified office stock of India.
The research note pointed out that NCR and Hyderabad lead the fray in terms of the share of certified buildings in their respective total stock, with a 44% share each; followed by Chennai at 37%. Meanwhile, Mumbai (16%) and Pune (15%) have a significant potential to improve their share on this parameter.
Further, the note explained that cities such as Bangalore, Mumbai, and NCR have a higher proportion of certified stock in their non-SEZ projects whereas Chennai and Pune showed a higher share of certified stock in their SEZ projects.
However, while there has been an increase in certified stock in the past decade, the CBRE note also stated that "its share in overall leasing has also been increasing in cities such as Bangalore, NCR, and Hyderabad. Certified assets have also witnessed relatively lower vacancies as compared to non-certified ones. While this may not be entirely due to sustainability certification, as several other factors such as asset quality, location, amenitization could also be at play; nonetheless, occupier appetite to locate themselves out of such certified assets is definitely strengthening."
Anshuman Magazine, Divisional President – India, South East Asia, Middle East & Africa at CBRE said in the note, "The growing clamor surrounding ESG is actually a reaffirmation of an old adage – a business cannot exist in isolation. As the world around us changes, financial and economic feasibility are not the only metrics that are linked to a business’s success today. Climatic, societal and ethical issues are now taking the limelight, a trend that got accelerated due to a combination of events - the COVID-19 pandemic, severe weather mishaps and the COP26 conference. As a result, businesses are now increasingly finding it imperative to develop forward-looking strategies that take these factors into account, causing ESG to evolve from a peripheral balance sheet issue to a key component of investment decision-making."
"With increased scrutiny on ESG, CRE stakeholders need to understand, improve, and leverage their performance on this front to drive value and stay competitive. The essential question is no longer what to do, but rather how to do it," Anshuman added.
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