Retrofitting and upgrading old commercial office spaces with modern amenities, designs and building technology presents an investment opportunity of an estimated Rs 5,500 crores in India, said JLL India.
Real estate investors and landlords are missing income opportunities and cost savings as their assets age in Asia Pacific. Half of investment properties in prime locations in Asia Pacific are over 20 years old, and JLL 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% of the total stock. Around 28% of these buildings are more than a decade old, sans the latest facilities that newer buildings offer.
Without asset enhancement, offices, shopping malls, hotels, residential buildings and industrial facilities will lose relevance due to evolving end-user habits and preferences.
JLL’s research reveals that rental rates for aged and outdated buildings are 10% to 40% lower than up-to-date, well-managed properties in similar locations.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.
According to him, while age of the building is one of the measures for identifying the need and potential of upgradation, the market will also witness a trend of newer buildings undergoing or planning for development to keep up with the evolving trends and occupiers’ preferences.
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 aging properties.
Driven by the accelerated demands for health and wellness features, enhanced human experience, sustainability and technology tools following the pandemic, JLL has identified office, residential, retail, industrial and hotel properties that present the most potential for asset enhancement.
