World Earth Day 2024: More than half of India’s A Grade office stock is now sustainable

Cities leading the demand for green certified buildings are Bengaluru at 122 mn sq ft, Delhi-NCR at 80 mn sq ft and Mumbai at 73 mn sq ft

Sustainability has now been incorporated into the boardroom agenda. Almost 56% percent of India’s Grade A office stock spanning 815 mn sq ft is now green. The cities leading the demand for green certified buildings are Bengaluru at almost 122 mn sq ft, Delhi-NCR at 80 mn sq ft, Mumbai at 73 mn sq ft and Hyderabad at 68 mn sq ft, data shared by JLL Research shows.

World Earth Day 2024: Almost 56% percent of India’s Grade A office stock spanning 815 mn sq ft is now green, a report has said (Picture for representational purposes only)

The total office space leased over the last two years (2022-2023) stood at 113 mn sq ft of which 70 mn sq ft was green, the data showed.

Sectors that lead the green initiative in the last two years (2022-2023) include technology, banking, financial services and insurance (BFSI) and manufacturing. These sectors have led with a combined share of around 59% of space leased in green buildings which equates to 41 mn sq ft.

Global Capability Centres lead demand for green buildings

Global Capability Centres have leased approximately 50% of all spaces in green-certified buildings, the data showed.

Also, GCCs account for 76% of all currently active green leases in India’s office markets. Green leases are defined as lease agreements where proactive green clauses pertaining to developer-occupier obligations towards sustainability goals are agreed upon.

This surge serves as a testament to the joint efforts of asset owners and occupiers to promote responsible leasing practices in the industry. However, widespread adoption is still a long way, and this can be attributed to the lack of industry-wide guidance, transparency, legal complexities, and split incentives, it said.

Green leasing clauses mainly focus on waste management, energy efficiency and data sharing aspects, with waste management and recycling obligations finding their way into most green lease agreements and some standard lease agreements as well. Energy efficiency is an important instrument towards reducing a building’s carbon footprint and hence, multiple clauses are centered around it, it said.

Another report by the real estate consultancy firm said that 83% of occupiers in the country are planning to achieve 100% green certified portfolios by 2030, marking a significant increase from the current 3%.

Demand for green buildings expected to outpace supply

The report also indicates a substantial demand for sustainable buildings that is expected to outpace supply. As a result, occupiers foresee the possibility of increased rentals for sustainable spaces, presenting them with one of their top challenges in pursuing decarbonization. This surge in demand for sustainable offices is happening in the backdrop of corporate Net Zero ambitions.

By 2030, nearly half of Indian occupiers will insist on leasing exclusively with landlords who are willing to sign green lease agreements. Half of occupiers are aiming to have green lease agreements with their landlords in the next three years, as part of their efforts to reduce operational carbon emissions through better management of energy, water, and waste, the report said.

The biggest concern for corporate India is the possibility of introduction of carbon taxes or fines based on emissions, it said.

Of the total REIT stock, 81% is green certified

Another report by Cushman & Wakefield has observed that office space occupiers’ preferences are changing in favor of better grade assets that take care of the firms’ environmental, social, and governance (ESG) compliances as well.

Real estate contributes to almost 40% of global carbon emissions, and occupiers are increasingly sensitive about this. It noted that ESG-compliant stock is on the rise. Of the total 727 mn sq ft of Grade-A stock in the country, almost 49% is green-certified and of the total green certified stock, 19% is under REITs. Also, of the total REIT stock, 81% is green certified, it noted