The average age of Delhi’s commercial office space buildings is more than 50 years now, since most district centers, community centers and LSC’s are a product of 1962 masterplan, and these decaying structures have hardly ever been modernized or even partially revamped. If a brand-new commercial building comes up next to them, these buildings stand out like forgotten outposts of a lost era. This stark difference is amplified 10 times more after the pandemic when companies are seeking modern and hygienic buildings which could appeal to their employees.
A trendy office has become ever more important as companies will find it difficult to retain talent if the office is not cool enough for the gen Z work force which is high on things like hybrid work culture, metaverse and remote first after the pandemic. If they are leaving the comfort of their homes, they want a few luxuries like gym, trendy restaurants, break out areas, fun zones etc inside the office in exchange. A cursory walk inside 90% of Delhi’s CBD Connaught Place’s high-rise office space buildings is enough to feel how far behind these are for most international companies and why the modern workforce finds them odious. Now take a walk inside of any building at Aerocity or Cybercity or Gold course road in Gurgaon and feel the difference. Its easy to see how these locations which are more than 10-20 miles away from CBD area are now consistently maintaining double the rent of 90% of office space buildings in Connaught Place CBD area or for that matter any of the old SBD locations in Delhi. IFCI building in Nehru Place is another outlier, D 21 in Dwarka, MAX tower in Okhla, many such examples can be seen in various parts of Delhi, which are far out and their landlords are enjoying the sunshine while other buildings next door are struggling. One can understand a marginal difference and discount it as a transitory thing; however, the difference is huge and it has been maintained ever since these modern business districts or standalone buildings came up.
There is a noticeable spike in calls from landlords that are looking to make an exit from such assets, as soon as some stability has come in the market after the 2-year corona crisis, especially if the properties have been duly made freehold status. It’s easy to see why landlords are feeling this way, since they have seen better days and now, it’s difficult to keep up with even the taxes and maintenance dues of the very same assets, especially in NDMC/L&DO governed areas.
Now the question is, if it’s a good idea for the landlords of a certain old building to pool in and invest in doing a major overhauling of the building or just take a decent exit. If it was Gurgaon or Noida, one would have second thoughts since there is too much inventory all around and both cities are ever expanding with both respective governments opening up new lands every now and then. However, with Delhi, especially with locations which are within 10 KM radius of CBD and Lutyens Zone, there is hardly any scope for new development and whatever the city has to do, it has to make do with what it has. To put it in perspective, just cybercity and Udyog Vihar in Gurgaon has more office space than the entire Delhi’s CBD and all SBD’s put together. Delhi is acutely short of quality commercial space and that’s why anything new which comes with decent specifications is lapped up fairly quickly.
Now as far as doing a gut renovation of a certain commercial office building in any of the district centers is concerned, it’s not an easy task, since it would first require the multiple unit holders (often over 25-50 on an average) in the building to mutually agree and secondly the Delhi development authority and local municipal bodies should be ready to accept and approve any such proposal. It’s easier for smaller plots where building consensus is easy and all such buildings have seen good rental returns also after redevelopment. So complete redevelopment is out of question unless, state is a party to it and comes up with a policy which would include increasing FAR and improving supporting infrastructure.
So, one thing is clear, that there is shortage of commercial office space in Delhi and this shortfall will perhaps remain intact for another decade or two by which time most leasehold properties would be near their 99-year lease term and state would likely formalize a policy. State however has started noticing the degrading supporting infrastructure in all district centers and is now working on improving all of them one at a time. First one was the Basant Lok complex (completed in 2020), currently work is being done at Bhikaji Cama Place and Nehru Place is slated to finish sometime this year. The work involves improving building facades, drainage system, plazas, and the tensile structures within the district center. Additionally, they are installing more utilities at various places, adding kiosks, escalators, amphitheatres etc and also setting up multi level parking sites nearby. This will surely make the overall experience of visitors and tenants in district centers delightful.
Now, comes the amenities and overall facilities inside the building which is for most buildings is downright repulsive. If a certain building improves even a little bit, the change is quite noticeable and there is so much the landlords can do here. All that is required is a united will to improve things and with some reinvestment in their facility management teams and infrastructure, fortunes of their assets can change dramatically. Many of the coworking operators like scootr, awfis, coworks etc have done it successfully where they manage a certain floor of a non performing building professionally and aesthetically and are able to fetch almost double the rent. Bigger landlords can take the lead and engage various young proptech start-ups to share innovative ideas to improve tenant experience within the limited scope of building’s overall infrastructure. Speak with international facility management companies like Knight & frank, Cushman, CBRE, JLL etc by offering them business opportunities in multiple assets across Delhi, thereby cutting a mutually beneficial deal. The tenant today is willing to pay extra for good service and quick to switch from a poor one. This extra maintenance cost can be easily passed on to tenants and most coworking operators are already doing it successfully now.
The situation today for most Delhi office space buildings compared to NCR buildings is that Delhi building’s are hugely underpaid relative to how prime their location is and its largely because of how they are managed internally, even a mediocre effort by landlords can bring up their assets at par with most successful assets in NCR, and landlord’s with a vision have a huge opportunity in front of them to increase ROI.
