Just 44 per cent of premium office space green certified; Green buildings command higher rent: Report

New Delhi: Only 44 per cent of total Grade-A office space across seven cities is green certified, despite environment-friendly buildings being able to command an average rental premium of up to 36 per cent, according to JLL India.

In its report 'Tracking the green footprint in India's office market', property consultant JLL India mentioned that the total Grade A (premium) office stock across seven major cities is 732 million square feet, out of which IT stock is 522 million square feet and non-IT 210 million square feet.

The seven cities are Mumbai, Delhi-NCR, Bengaluru, Chennai, Hyderabad, Pune, and Kolkata.

"A total of 321 million sq ft of Grade-A office stock is green certified in India. This is 43.8 per cent of the total stock of 732 million sq ft spread across seven cities, as of March 2022," JLL India said.

The most popular green certifications/ratings systems in India are the USGBC LEED, IGBC, GRIHA and EDGE.

"LEED certifications clearly hold the edge among all popular rating systems. In fact, 80 per cent of the entire green-certified Grade-A office stock holds a LEED rating. IGBC ratings are the Indian equivalent of the LEED rating and account for 19 per cent with GRIHA yet to become more prevalent," the report said.

In addition, around 10 million square feet of green-certified stock also holds a dual certification, being LEED as well as EDGE certified. EDGE certifications, an initiative by IFC, are also gaining more traction in Indian real estate across all asset classes.

"It is heartening to note that in India's Grade A office space, around 235 mn sq ft is certified as LEED Gold or higher. However, with just around 44 per cent penetration levels, green certifications still have a long way to go...," the consultant said.

While upgrading and retrofitting for aspirational green certifications are more easily achieved in singly-owned and professionally managed buildings, this may be a tedious process for strata-titled buildings, the report said.

The property consultant noted that there are obvious commercial incentives to getting a green rating in terms of rental premiums and better occupancy levels.

"It is imperative to look at growing the overall certification coverage if we are to look at achieving the net-zero pledge of 2070 for India, with real estate set to play a crucial role," JLL advised.

As per the data, Delhi-NCR leads the overall share of green-certified stock in the country with about 67 million square feet, closely followed by Mumbai with about 66 million square feet. Collectively, Mumbai and Delhi-NCR account for 41.2 per cent of the total green-certified stock in the country.

JLL India's report also mentioned that institutional investors including REITs hold 220 million square feet of Grade-A office stock, which is about 30 per cent of the country's overall office stock. Of this, over 79 per cent or 175 million square feet is green-certified.

The consultant said that going green has its advantages. There is a 13.2 per cent average rental premium in green certified IT buildings and a 36.1 per cent average premium in non-IT buildings.

"There is a marked urgency and focus on setting long-term sustainability goals. Green certifications aid in reducing carbon emissions thus contributing to a better and healthier tomorrow. What is most heartening to see is that occupiers have been driving the shift towards climate-conscious and green buildings," said Radha Dhir, CEO and Country Head, India, JLL.

On green building concept, Gurugram-based realty firm AIPL's Head- Sales & CRM Saurabh Shankar said: "We understand that sustainable and environment friendly construction is the need of the hour. Such construction is also appreciated by investors and occupants."