Coworking spaces increase ESG investments due to rising demand and higher rents
Co-working spaces in India, such as Urban Vault, Incuspaze, The Executive Center and Awfis, are increasingly investing in ESG (environmental, social and governance) practices. These practices yield higher rental yields and more and more companies are demanding workplaces that meet ESG standards.
The increased ESG investments are in line with India’s goal of achieving net zero emissions by 2070.
Bengaluru-based Urban Vault reported a 41 per cent increase in rents for ESG-certified properties during the third and fourth quarters of FY24. It also noted that most companies are now basing their leasing decisions on the extent to which buildings comply with international ESG standards.
“Urban Vault has seen a significant increase in demand for ESG-certified properties. Almost all negotiations for office spaces now include sustainability as a key metric. With more GCCs (global capability centres) coming to India, ESG standardisation has become the norm. We are investing in ESG-compliant projects to meet the growing demand. Corporates are increasingly looking for office spaces that can contribute to their overall sustainability strategy and goals,” said Amal Mishra, CEO, Urban Vault.
Urban Vault plans to invest Rs 40 crore in various ESG initiatives in FY25, up from the Rs 10 crore invested last fiscal. “Given our robust plan to double our capacity over the next 24 months, leasing ESG-certified properties is one of our key priorities. Furthermore, having ESG-certified properties gives us a competitive advantage,” Mishra added.
New Delhi-based Incuspaze said there is about a 7-9 percent difference in rental prices between ESG-compliant and non-compliant buildings. Moreover, the government offers various incentives, such as discounts and additional Floor Area Ratio (FAR), to developers for constructing green buildings.
“Our key ESG practices include implementing energy-saving technologies such as LED lighting and energy-efficient HVAC systems, and conducting regular energy audits to identify areas for improvement. We prioritize sustainable design by using eco-friendly materials and construction practices, and designing workspaces to maximize natural light and reduce reliance on artificial lighting,” said Sanjay Choudhary, Founder and CEO of Incuspaze.
Incuspaze plans to invest Rs 75 crore in ESG initiatives, covering 500,000 sq ft for sustainable development. In addition, the co-working company has leased 2.20 million square meters of office space in an ESG-compliant building.
“Expansion plans for ESG buildings include a strategic focus on acquiring LEED-certified properties. We aim to acquire an additional 1 million square feet of ESG-certified space by the end of this year,” Choudhary said.
According to the Executive Centre (TEC), the current rental rate for green buildings is 3 to 5 percent.
In addition, large companies require the necessary paperwork and green building certifications before they can rent office spaces, which is essential for the publication of their annual ESG report.
“The rising demand for ESG-compliant buildings is clearly visible as multinationals and GCCs are becoming more stringent about their ESG goals and emphasising occupancy in green buildings in their global real estate portfolios. However, it will take some time for the availability of green buildings in India to match the global average. Addressing this gap is crucial for India to remain competitive in attracting and retaining global companies committed to ESG standards,” said Manish Khedia, managing director, West India, South India and Sri Lanka, TEC.
TEC plans to spend between 5 and 8 percent of its total investments on ESG initiatives, up from 2.5 percent last year, due to increased green building expansion and customer demand.
“The concept of a green workplace is on its way to becoming the norm rather than the exception,” said Amit Ramani, Chairman and CEO of Awfis Space Solutions.
To achieve this, “we have embraced key initiatives such as obtaining WELL certification, which focuses on employee health and well-being by emphasizing air quality, water quality and lighting, ensuring ensuring that our workspaces are not only sustainable, but also conducive to the health and productivity of our customers. We are also pursuing LEED ratings to reduce our carbon footprint and combat global warming,” Ramani said.
First print: Jul 01, 2024 | 4:51 PM IST