The preference of office occupiers to lease in green-certified buildings has gained significant traction in key markets across India, as per a report by Colliers, a real estate consulting firm. During the second quarter of 2024, approximately 13 million square feet of office space in the top six cities was leased in green-certified buildings, representing a 24% year-on-year increase and accounting for an impressive 82% share of the overall leasing activity during the quarter.

This rapid growth is a testament to the rising awareness among corporate occupiers regarding the role that built structures can play in mitigating climate change through the reduction of carbon footprint. Bengaluru and Mumbai remained at the forefront, together accounting for over 50% of the leases in green-certified buildings during Q2 2024. Interestingly, about 60% of the 13 million square feet of leases signed in green buildings were in relatively newer developments, which have been completed within the last 5 years.

The prominent green certifications available in the Indian market, such as LEED, GRIHA, and WELL, assess various parameters, including energy consumption, waste generation, and the alignment of design with health and wellness aspects, to validate buildings as 'green.' Real estate developers are increasingly aligning their offerings with global sustainability standards, simultaneously presenting tangible benefits to their tenants, such as lower operational costs, improved indoor air quality, and enhanced employee productivity.

The trend is particularly prominent in the technology, engineering, and manufacturing sectors, with about 80% of leasing by these firms since 2023 occurring in green-certified buildings. Furthermore, 62% of flex players also prefer to occupy space in green-certified buildings.

Overall, at the country level, technology sector accounted for about 27% share in the cumulative space taken up in green-certified buildings since 2023, followed by occupiers from Engineering & Manufacturing and BFSI sectors with about 19% share each. Collectively, the technology, engineering and manufacturing, and BFSI (Banking, Financial Services, and Insurance) sectors account for about 65% of the cumulative space take-up in green-certified buildings since 2023.

In tandem with the rising demand for green-certified buildings, the green building stock in India is also witnessing a significant increase. As of June 2024, nearly 67% of the Grade A office buildings across the top six cities were green-certified, with Bengaluru and Delhi NCR accounting for about half of the green office stock in the country. Notably, 70% of the 13.2 million square feet of new Grade A office completions in Q2 2024 were green-certified, and the majority of the over 150 million square feet of upcoming Grade A office developments in the next two-three years are likely to be green-certified, expanding the country's green office stock to over 600 million square feet.

The growing demand for green-certified buildings has prompted several Grade A developers to increase their sustainable offerings in their commercial portfolios. Additionally, developers are also retrofitting aging office stock and incorporating sustainable elements in overall building design and construction, with the potential to refurbish around 300-350 million square feet of commercial building stock older than 10 years, further contributing to the expansion of green-certified office space in India.

This trend is further strengthened by the recent measures introduced by the Securities and Exchange Board of India (SEBI) to simplify the disclosure of environmental, social, and governance (ESG) information by listed companies and their value chain partners. Under the new proposal, companies will be required to disclose ESG metrics for value chain partners who individually account for 2% or more of a company's purchases or sales by value, providing an additional thrust for occupiers, investors, and developers to increasingly consider green portfolios while meeting their ESG targets.

The surge in demand for green-certified office buildings in India underscores the transformative shift in the country's commercial real estate landscape. With supportive regulatory measures and the tangible benefits of green workspaces, this trend is set to accelerate, positioning India as a global leader in the adoption of sustainable structures.