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Are India’s CBDs losing out to PBDs?

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CBDs, once the lifeline of the businesses are fast losing out to secondary business districts and peripheral business districts.

Should businesses continue to operate out of old-jaded buildings at the heart of the city? Or, is it more convenient for commercial activity to move to the upscale swanky offices in the peripheral locations, where the cost of doing business per sq ft is much lesser? Is walk-to-work only a city center reality across the urban pockets? These are the subjects of serious discussions across the built environment of commercial real estate the world over.

In India, too, the commercial real estate landscape is fast-changing and CBDs (central business districts), once the lifeline of businesses is fast losing out to the SBDs (secondary business districts) and PBDs (peripheral business districts). It is not a region-specific phenomenon but happening across the cities.

In the national capital, for instance, Connaught Place was the first choice for the business till a decade back. Now, apart from Gurgaon PBD (it is actually no more a PBD but could claim to be the CBD of NCR on its own), the emergence of Noida is giving a tough contest to Connaught Place.

Similarly, who would have thought a decade back that ICICI Bank, National Stock Exchange, Reserve Bank of India, Diamond Bourse, etc., would shift their offices from the most preferred location of Nariman Point in Mumbai to BKC (Bandra-Kurla Complex)?

Rajeev Sharma, a local real estate agent operating in Gurgaon for the last two decades, maintains that the trend of PBDs’ preference has evolved over the years. According to him, it has not been a case of an overnight shift from Connaught Place and south Delhi to Gurgaon. More importantly, businesses have done their cost and benefit analysis in a time-bound space.

“When the high rentals made many of the small businesses unsustainable in places like Khan Market, Nehru Place, or Greater Kailash, they had no choice but to move out to the cheaper locations of Gurgaon. What actually changed the market dynamics, was the trend of large corporates preferring to set up their businesses in Gurgaon. The large floor plates demanded by these MNCs changed the market reality,” says Sharma.

The advantages that SBDs and PBDs offer

What led to the emergence of PBDs and made it a tempting proposition for the businesses, at the cost of the CBDs? Let’s examine the ground realities.

Decaying old buildings of CBDs: Most of the office complexes in and around the CBDs are old buildings. These buildings only have the USP of locational advantage, while upscale businesses wish to operate out of swanky offices with all modern amenities incorporated within.

Horizontal growth of the housing market: It is all about the target audience for businesses. The horizontal growth of the housing market across the major cities of India has given the businesses shifting to the periphery locations the dividend of a large catchment area. Naturally, there is no major disincentive to shifting out of the city center.

Rental cost: Rentals across the CBDs of the major cities of India had skyrocketed over the years. This made businesses unsustainable in many cases. The PBDs offered a breather at the most competitive prices, compared to the CBDs. Hence, businesses started shifting to these peripheral locations.

Better infrastructure and connectivity: Be it Connaught Place in Delhi or Nariman Point in Mumbai, CBDs are known to have traffic bottlenecks. In contrast, PBDs in most of the urban pockets of India do offer better infrastructure and connectivity. They are more often than not also better planned urban pockets.

Social infrastructure: In an age of ‘Live, Work & Play’ corporates and MNCs wish to attract the best of talent with certain add-ons to the otherwise stressful job profile. Commercial spaces in PBDs are today offering better recreational and social life to add zing to the professional life and that too, within the office complexes. Naturally, they have emerged as the ideal choice for both, the employers, as well as the employees.

CBD vs PBD and SBD

There is no denying that there is pressure on the rentals of CBDs across the major cities of India. However, this raises the question as to whether there are no takers for CBDs. More importantly, does it make sense to have an office or shop in CBDs?

Analysts tracking the commercial property market suggest it is a subjective question. Losing out to PBDs and having pressure on the rentals does not mean that the relevance of the commercial spaces in and around CBDs is over. As a matter of fact, vacancy levels across major CBDs of the Indian cities are not that high.

The nature of the business defines the need and requirement of commercial spaces. There are many businesses that need to cater to the local market. The residential market in and around CBDs is mostly upscale and the purchasing power is high. Hence, many luxury brands prefer to have their presence over there for their brand positioning and/or recall value.

The upscale residential colonies in and around CBDs also need a walk to work or closer to the home office option. Many of the HNIs still prefer to have an upscale address, both for home and offices.

In the ultimate analysis, whether one should opt for CBDs or PBDs, will depend upon many variables like the nature of the business, clients’ profile and preferences, risk vs returns, logistical requirements, etc. Nevertheless, the huge gap between the rentals of CBDs and the PBDs, means that commercial real estate in and around CBDs will need to reinvent itself, to remain relevant.



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