As India's economy expands, is a boom in office construction inevitable?

Get ready to supercharge your understanding of India's booming office space market with AWA's Shashi Sharma and Director of Corporate Real Estate for Carelon Global Solutions in India, Sanjeev Tullicherry. We ask whether India's economic growth can be balanced with environmental sustainability by adopting strategies like refurbishing existing buildings instead of constructing new ones?

We delve into the heart of commercial real estate's environmental sustainability, extracting insights from the growth of the IT/ITS sector in India and the new trend of hybrid work. We discuss the transformative steps companies are taking towards construction sustainability, and how the Indian government is championing the transition towards renewable energy sources. We also shed light on workplace practices that are pushing the boundaries of sustainability. From waste management to electric vehicle adoption, companies are engineering green practices into their office culture and leasing terms, to make a real difference.

Dive in to discover how certifications like WELL and LEED are stimulating the momentum for sustainable transformation in India's commercial real estate.

AWA Host: Karen Plum

Guests: 

• Shashi Sharma, Senior Associate, AWA and Head of AWA Institute in India
• Sanjeev Tullicherry, Director of Corporate Real Estate, Carelon Global Solutions 

AWA Guest details: https://www.advanced-workplace.com/our-team/ 

CONTACTS & WEBSITE details:

AWA contact: Andrew Mawson 

AWA Institute contact: Natalia Savitcaia 

Music: Licensed by Soundstripe – Lone Canyon

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Thanks for listening to the DNA of work podcast

Transcript

Karen Plum: 0:00

Hello there. As organisations think about how much space they need to accommodate their hybrid workforces, we're going to take a look at what's happening in India, with a particular focus on sustainability and environmental concerns, as its economy grows and the demand for office space increases. Let's get started. Welcome to AWA's podcast, which is all about the changing world of work and trying to figure out what's right for each organisation, because we know that every one is unique. We talk to people who have walked the walk, who've got the t-shirt and who've learned lessons that they're happy to share with us. I'm your host, Karen Plum, and this is the DNA of work.

Karen Plum: 0:47

India's rapid economic growth is driving the establishment and the expansion of businesses, leading to an increased demand for Indian knowledge workers, particularly in the technology sector. As a result, demand for office space is soaring and there are concerns about the potential detrimental environmental impact of all the new space. So how is India facing this stage in its development? In this episode, I'm talking with two highly experienced guests. Firstly, my colleague, AWA Senior Associate, Shashi Sharma, fresh from his involvement in the Work Green Conclave, which brought people from around the world to Mumbai to explore the pressing environmental challenges and strategies for sustainable transformation. And we're joined by Sanjeev Tullicherry, Director of Corporate Real Estate for Carelon Global Solutions in India. I started by asking Shashi if he was seeing any corporations actively trying to resist the urge to simply build more space to accommodate their expansion in India.

Shashi Sharma: 1:53

Oh, Karen, that's a very interesting question that's put because, as we saw yesterday, We Work has filed for bankruptcy. But having said that, India entity of We Work is still going strong and they say that they are going to continue this absolutely different. So the sentiment of the commercial real estate occupiers as well as the people who are building new spaces after COVID it has definitely mellowed down and a lot of thinking has been going on how to maximize the real estate footprint, what they have. But the builders, top builders, are still building it and I see we have already reached the pre COVID level of new office spaces. So that is there. But there is a distinct underlying thought that we need to be cautious about having new, more spaces added on.

Karen Plum: 2:51

Where is that caution coming from? Is that coming from people like yourself, who really have a focus on environmental impact, or do you see that more widely in the, well, I suppose, you know, the people who are building the buildings are probably not thinking so much that way?

Shashi Sharma: 3:09

There's basically two thought process which is actually holding this on. One is, of course, the return to office idea, whether how many people are going to come back the admins, administrators and, you know, real estate directors like Sanjeev are they going to fill those spaces they are going to build and bring into their footprint? Are that going to be filled up or not? So that's another critical thought process which is going on. For the second one, yes, I somehow feel, and, of course, since I'm passionate about the climate change and global warming and that's the kind of view I have at the you know, at the long term.

Shashi Sharma: 3:50

maybe I'm biased but I also feel underlying current of people not trying to find new spaces, trying to refurbish. I have talked to a lot of many architects In the country who came from all over the world UK, US and there is a very distinct thought that why do we need to do and reinvent the wheel all the time? Why don't we go back and try to refurbish the areas and make it more efficient? So these two distinct thoughts which I think is bringing some sense or some responsibility to having a new place. That's what I feel.

Karen Plum: 4:33

And are there lots of buildings, lots of opportunities to refurbish? Are some of those available because of the post pandemic different way of working, perhaps those organisations don't need as much space as they did before?

Shashi Sharma: 4:49

Absolutely. The DNA for Bangalore commercial real estate has been that not many people come here. 94% is occupancy rate. So people keep on building upon building it and then more people are coming because of the kind of skill set this city has, you know, amassed and got together. So naturally there's a growth potential of Bangalore, of Karnataka, as a commercial real estate hub. Almost half of the grade A building happens in Bangalore. So we are talking about 42 million square feet across India. Around 70 to 90 million square feet happens in Bangalore.

Shashi Sharma: 5:31

So there is a lot of push from the occupier side to find new buildings and whenever somebody is make have decided to go for, let's say, 100,000 square feet, they would like to be in the best places if they're investing money. So naturally that is what the push is going and that's where most of the prominent builders are catering to. But having said that, there are many people who have actually released I know for sure quite a few of my industry friends and peers have also released a substantial amount of square feet at their footprint. So those spaces are available and now many of the designers and the people are working on those spaces to refurbish or reuse, re cycle.

Karen Plum: 6:13

Yeah, it's very encouraging, isn't it? Sanjeev, what does this look like from your point of view? What are you seeing?

Sanjeev Tullicherry: 6:20

You know I'm a bit different from what Shashi is saying. Let me paint a larger picture. The biggest real estate takers today are the IT and the IT industry in India. The IT industry is some 230 billion or 240 billion dollar industry, that is today. Nasscomm, which is the industry body, their prediction is that this industry is growing anywhere between 11 to 14 percent and by 2026, that is, three years down the line, this could be a 350 billion dollar industry. Whether we hit 350 in 2026 or 27, 28, irrespective, but the direction is, this industry is going there. So, which means if all this work is getting done here, you need office for people. So the take is this - the quality grade A will grow and I think a lot of large builders see that and that is why today, as we talk now, you've got a lot of them kickstarting work on new projects. I was in Hyderabad early this week, I see that there. I've se en Bangalore. I see that in Gurgaon - these cities that I know a bit about - and Pune, right. I n all the cities, landlords are breaking ground, which they didn't do for last three years during the height of COVID. So that's one thing that's happening, so there is growth there. Second is as people come back and it's not been going at the speed at which companies want, there is spare capacity there, so there is a maximization happening. One big thing that's happened in most companies pre COVID, everybody had a desk right. If you had 100 people, you build a desk for 100. Now companies are maximizing that. So maybe for 100 people you're building 90, 80, 70, 60. Each company has its own way of doing it, but I think generally the industry is floating between 60 and 70 generally. So hence what we are seeing is growth and in the next few years that growth will grow.

Sanjeev Tullicherry: 8:47

Along with this, what is also happening is there is growth of manufacturing happening in India. The logistical challenges that the world went through during COVID, because all the manufacturing was happening in China and they all got stuck. So there is now there's something called China plus one, for which, for a lot of companies, India is up there. There are other competitors India, Mexico, Vietnam, Cambodia, Philippines, Malaysia. There are a lot of countries up there, but in all of this country, the largest is India. It's also one which has a large local consumption market and hence there is a lot of manufacturing coming here.

Sanjeev Tullicherry: 9:33

Apple came to India manufacturing some five, six years back and what I read from newspaper, they're manufacturing five percent in India. The target i s to hit 25 percent over the next three to five years. So there is huge manufacturing that is coming in. So hence it's just not tech companies building large campuses, its large manufacturers building large manufacturing plant, right? And the other thing that's happening, lots of people who have existing space, they're also looking to maximize it. They're redesigning it, making it more sustainable, and that is the other thing that is happening. So you've got three big things happening at the same time. A lot of new construction for the growth in IT world, a lot of the construction happening for manufacturing, and a lot of companies who have large real estate portfolio are maximizing their portfolio and in that maximization, when they redesign, sustainability is a big factor there.

Karen Plum: 10:36

Yeah, it's quite a big and complex picture, isn't it? As you say there's lots of different things going on. I'm guessing the manufacturing buildings, plant being sort of planned and delivered won't necessarily have big office space as well, but nevertheless it's part of what's being built and therefore from a sustainability point of view, from an environmental point of view, it might not be welcome that we're throwing up lots more buildings, but clearly there is a bigger imperative here, economically.

Sanjeev Tullicherry: 11:09

The manufacturing is something which has a large government focus in India, right, the large incentive being rolled out. So simple reason - those jobs are going to the bottom of the pyramid in the economy. Right, which is a large base. Large manufacturing is large jobs, large jobs is driving people out of poverty. Right. The IT jobs are more well-educated, engineering graduates and of course there are other academic qualification, but that job mostly is for extremely well-educated. The manufacturing jobs are going to people who maybe just in high school pass out and other qualification and that is a huge base right, and hence there's a huge emphasis on it and there's a lot of emphasis on it and a lot of focus on it.

Karen Plum: 12:09

Yes, but it's going to bring a lot of jobs and wealth to that part of Indian society.

Shashi Sharma: 12:15

I wanted to address that three important things, what Sanjeev has just mentioned. One is the manufacturing in India per se, was never affected by COVID at all. Even I know for the during the lockdown period, ABB was working, they had passes, they have everything. So when we talk about commercial real estate, so the manufacturing areas does not have much large footprint in terms of the commercial real estate which basically I'm talking about the workplaces and the offices. And, having said that, so we already have a large organization like Indian Railways, BHEL and all these big, big corporations that we have in India as a manufacturing. They were always there, yes. But Sanjeev has hit the nail on the head that we will be China plus one and this is going to have an absolutely phenomenal growth where the employment and the good for the people at the bottom level will come, and this will take the country from $4 trillion economy to $20, $24 trillion economy in 2050. So that's very definitely is going to happen and that is very important.

Shashi Sharma: 13:29

But I would rather focus this discussion is about commercial real estate. So I would rather focus what Sanjeev pointed out very clearly as a $250 billion economy on the IT and ITS, and this is the area where the large footprint happens. And now this $250 billion economy is, of course I agree with Sanjeev it will go to $350 billion economy in the next three years is definitely going to do that. But my, if you look deeper into this, the growth of almost 50% of growth on the IT and ITS services will not result the 50% growth in the footprint. You know. The point is that 50%, $100 billion growth in the spaces in the IT ITS sector is not going to result as the same as pre- pandemic, the real estate footprint, because now the hybrid work is going to work. So, basically, when we say that the 50% growth, this is not going to result in 50% growth in terms of greater commercial buildings.

Shashi Sharma: 14:32

So 42 million square feet may not, it's not going to become 60 to 70 million square feet in next three years. It will have an impact. It will have another 5 to 10 million square feet will be added in the grade A office space I am talking about and that is why a lot of people are doing it. I agree with Sanjeev completely go to Mumbai, go to Pune, go to Delhi, go to Hyderabad. There are a lot of builders breaking the grounds. Yes, that will happen. So that is one in difference I wanted to bring to the discussion.

Karen Plum: 15:05

Absolutely so they're certainly they're building, but they're building less than they would have built in pre-COVID times because they would have been planning, as Sanjeev said, on a one person to one desk, or probably a bit more than one desk per person for a bit of padding and whatever. So that's interesting, but are you seeing that, as these plans take shape, for the new buildings, for the IT sector particularly, are they reflecting environmental concerns? Are they looking towards using renewable energy sources? Are they building with an eye towards being environmentally sustainable?

Sanjeev Tullicherry: 15:45

The answer would be yes, and I would divide this into two. One, large companies which have their own campuses, adding more real estate in that campus, and a large developer building their own campuses for multi-tenants. I think in both there is a large focus on sustainability in the construction. Especially companies who are building their own. They, I think, are far more focused in terms of what they do with the waste and even constructed. Everybody is going for WELL and LEED certification. Large tenants today are asking for that as a basic. Are you LEED certified, are you WELL certified? And hence landlords are bringing in best practices from a sustainability perspective, and that's happening across the renewable energy is again something that there's a large focus on.

Sanjeev Tullicherry: 16:47

As a country, there's a huge investment being made on renewable energy and so you w ill see a lot more renewable energy than that is there. So today for example, in Bangalore, this state is one of the most forward-looking policies on renewable energy. You could put a solar on your rooftop today and sell it to the government during day when you are at work. When you come back in the evening, you can barter that. When I was in the office, I sold you two kilowatts of power, I'm back home at 5 pm, now you give me two. And a lot of people do that, but even the other parts of the country, it's sort of a priority for this government. I don't have the exact data here, but I think that more money invested today in solar and wind in this country than anything else, and I think there's a target that the government has set for itself, a target for 2030 and 2040. As a country, you signed up for the Paris Declaration and the last I read is that we have among the very few countries were actually meeting our goals.

Karen Plum: 17:57

Right. Is that something that the government is really encouraging people to do? I'm assuming that the government's encouraging people to install solar panels? Maybe there are incentives, but I was interested also to know whether this is something that organizations try to encourage their employees to do, to install things like solar panels in their homes?

Shashi Sharma: 18:20

Yes, this is a big focus of Indian government. Prime Minister Narendra Modi has a huge amount of focus on this. Yes, it is incentivized and subsidized and the kind of money which is required to put a solar panel on the rooftop is not a very prohibitive kind of investment. It can be done, so that is why a lot of people are doing it. And the second part of the question what, Karen, you were asking was whether the Corporates are encouraging the employees to put a roof top solar panel. No. We were always kind of sustainable, even before pandemic and even before it become a big hit, so we were already there. So, for example, almost all the houses and offices now use LED and the whole thing has changed. And almost all the Corporates are pushing for the electric vehicles for their own transportation logistics. Almost all the offices are using renewable source of energy where they can get it. So consciously they're all doing it and the sudden things you're not able to do are they are buying those things in terms of carbon credits and other stuff.

Karen Plum: 19:32

Yes, and of course you get way more sun than we do in the UK, so it's a lot more solar to capture, isn't there?

Sanjeev Tullicherry: 19:41

I'll just, add there and when you said about you get more sun and we are slowly seeing, very slowly, the architects designing building which has less glass. You see, all buildings are all facaded all glass, right, for a country where there is so much of sun? It actually you're consuming more energy, right. So they are not thinking - we shouldn't be copying. A glass facade makes sense in Europe, but glass facade may not make sense in places in India where you got sun throughout the year, so those are actually pushing up your energy consumption.

Karen Plum: 20:24

So you get the solar gain on the building. Building heats up and then you have to cool down the interior, is that the way it works?

Sanjeev Tullicherry: 20:32

Yeah, that's the way it works.

Karen Plum: 20:34

Just to stop people getting too hot. Yes, interesting. So it's another aspect to the design side of things, and you're seeing that architects are moving away from having everything be glass.

Sanjeev Tullicherry: 20:54

Not a general statement. Slow, small changes. I know one company in the campus they just built a new building which went live a year plus, so they've sort of reduced the glass frontage and so they put some louvres up. The whole thinking is I shouldn't be heating up my building with the sun and then cool it down by using A/C. I know one particular place in Bangalore. But when I go to real estate meeting the government, people are asking this question - why are you copying? You need to design something based on the ground.

Sanjeev Tullicherry: 21:28

To give you a very fine example many years back there's a company in Bangalore who designed an office in Bhutan and they applied for a LEED certification. They said you can't get a LEED because there's no air con in the building. They said Bhutan doesn't require air con. Right, Bhutan is a country where the weather is so you don't need air con and hence there is a requirement of designing building, not only keeping local materials that people are talking about from a sustainability perspective. Don't buy marbles from Italy. Buy a granite stone which is 50 miles from the city where you live is also to the whole design perspective here, that you need to be thinking about it. Glass is maybe it's not a solution in a city like Bangalore, there's a better design, keeping the local environment in mind.

Karen Plum: 22:27

Yes, yes, absolutely, and environment and weather.

Karen Plum: 22:31

But, of course, we also know that weather patterns are changing. We're trying to anticipate how those things will change in the future as well, as climate change continues to happen, because, despite all of our efforts, we're warming up, aren't we? Yes, it's so true. So I'm wondering whether you have particular examples of, either in terms of construction or in terms of refurbishment and fit-outs that illustrate nicely how there is perhaps more of a movement towards environmental sustainability. I know, Shashi, what you were saying earlier shows that India was a lot further forward than many other countries.

Shashi Sharma: 23:18

Inevitably things are happening. Of course, on the front of the wind power and solar power, we are pushing very hard and I think we are kind of front-running this across the globe towards a large extent. Of course, we are not at the level of China and other countries there, and Europe for that matter, but we are doing that. And there's a lot of other construction activities which are happening, which adds a lot of carbon footprint because the country is growing and the infrastructure is being built up. Hundreds of kilometers of roads are being built in India, across India, a large country, and there are so many other large infrastructure projects that are happening. That is actually keeping us down in terms of our carbon footprint. But in terms of the commercial real estate, most of the builders what I have seen they have become very conscious. Of course, LEED certification is required and they are doing a lot of innovative stuff to bring in the renewable energy. In fact we are renewable, like Sanjeev said, the Karnataka is a renewable energy surplus. We are actually surplus now in terms of what we need.

Shashi Sharma: 24:29

So there is a lot of consciousness involved here, a lot of designers and other people. The first thing they do ask is how do you want us to do this building for you. Does ESG mean something to you? Do you like to work on that? Net Zero does it make sense to you? So these are the two front-runner things which is happening now. It has been pushed from various global aspects. So most of the corporates are focused on ESG and net zero and that is where almost all the designers are focused now. So the first question is definitely is all about, okay so how do you want us to do this for you? How would the recycle material do you want to use? Shall we do this way? Do you need Italian marble? Or we can do it from local sources. So a lot of stuff is happening here, yes.

Karen Plum: 25:19

Yes, interesting. So are you aware of any other initiatives within corporates that are encouraging more sustainable practices amongst their workforces, in terms of their daily activities, their daily lives both inside and outside of the organization?

Sanjeev Tullicherry: 25:42

Yes. So what I would say Karen is a lot of companies are bringing a lot of sustainable practices in the day-to-day operations in the company. So, for example, a lot of them are installing EV vehicle charging stations in their parking, right so that if you have EV car, you can charge and most don't charge you.

Sanjeev Tullicherry: 26:06

The charging is free, right. So that's a big one, okay, I get my car, I leave it in the office, charge it, I go back, I save money at home, right? So I think people are doing that. The people are also doing other things in the office. Get away from paper cups, do away with plastics in the office, recycle right, you're printing a lot of paper. When you print the paper, then when you recycle that paper, use the recycled notebook. There is large plan of most corporates looking at what what I call is making zero contribution to landfill. So it's a generator waste. Then Recycle that waste, right. So I know of organization which recycle hundred percent of their waste. There are organization and many are on that path. Some may be a 20, some may be 80, but I also know organization which are at hundred. They don't, they make zero contribution to landfill, which is impressive, isn't?

Sanjeev Tullicherry: 27:09

it so. So corporates are doing what I would call strategic and tactical stuff tactics of what they can do within the office day to day. Now, what you're seeing is large landlords also demanding that from their tenants who are saying this is a sustainable practice, we will follow, and they are incorporating that in the company leases. They're telling as you sign at least they're telling them here are the practices that you would need to do right - waste segregation, disposal, you know. So I think there is a what I would call it a lot of action like taking place, companies driving within their, within the offices, landlords driving within the campuses and, of course, at the strategy level, there are things happening at the state and at the country level. Yes, there is a huge amount of work happening out there.

Shashi Sharma: 28:00

Yeah, I would like to add what Sanjeev was saying, and I think we have sorted out the solar and wind power, the thing we are already done and dusted with. But the third very important which is happening and I'm very happy about this. Lot of push is happening on the electric vehicle front. A lot of firms are there who are actually providing the EV vehicles. A lot of firms I have personal, I don't want to name them here, but a lot of things are doing.

Shashi Sharma: 28:30

And this is also, interestingly when people like Sanjeev and other people occupiers when they sign the contract, they do ask, are you providing charging stations in the facilities or not? And that is something which is very, very encouraging for me and I think the pure focus from the corporate side is going to drive this electric vehicle business to a very, very large extent, very, very large extent, and that's something I think we'll sort this out in within, not very in the distant future. It's going to happen next one or two years. Everybody will demand at least, if not 50% of the available parking space to be electric charge. I know charging stations, but at least 20 to 25% they will demand and that is very encouraging.

Sanjeev Tullicherry: 29:19

And I just add what you were saying know what, what companies are asking? I think that the law that is now come in with mandate, all new construction, even residential apartment, need to have vehicle charging points. So I think there is the l egislative action taking place which really now will encourage a lot of people. If you want to buy a car today and if you stay in an old apartment, you struggle with charging it.

Karen Plum: 29:46

Yeah, absolutely yeah. For clients who are keen to adopt more sustainable practices, what's the piece of advice you end up giving them most often, do you think?

Shashi Sharma: 29:59

Okay. So whenever I am on this kind of a conclaves and conferences and places, people ask me okay, we understand this is happening and this is what it is, and so what do you want me to do? The one real piece of advice give - don't buy more, don't buy more. Right, simple life. It's as simple as that. You know. This whole thing can be sorted out if you don't have hundreds of suits, you know, in your cupboard and just being conscious of that - consumerism is not going to help the environment. So that's one piece of advice I give.

Karen Plum: 30:34

And I guess, don't build more buildings, right?

Shashi Sharma: 30:39

Exactly, exactly. So that is where you know, relates into that, you know you don't need, you know, such a large offices for people who are not in the office. Be conscious of that. And you have many spaces. And, interestingly, and this is where the technology has helped, you're not, you know, in 1970s and 80s you were tied up to the cubicle forms because you have huge PCs and other stuff. Now everything is cloud based and you can work and every seat in the office is a workstation for you, right? So you don't have to build hundred percent workstation. You have cafeteria, you have, you know, collaboration areas, you have conference room areas and everywhere people can work. So, interestingly, the COVID has percolated and crystallized the office space requirement from 80% to 60% now, and that's something which I feel is fantastic.

Shashi Sharma: 31:33

You know, earlier it was, you know, 80, 20. You know 20 people, 20% people will be outside, taking leave or traveling, 80% people in office. So we have to provide 80 seats for 80 people. Now this is, you know, something has become 60%. You have 100 employees. You have 60 seats. You should have the rest. People can, you know, adjust. It is just like you know, traffic if you give them more space, it will fill the whole space. Yeah, you know, if you just close it and people will find ways to do it.

Karen Plum: 32:02

And it's much more predictable now, or it's much more reliable that, you know, when it was 80 20 and it was just the 20%, those were probably people who were on holiday or they were off sick or they were training or whatever. Now you've got a whole community of people who actually want to be working somewhere else for a proportion of the week.

Sanjeev Tullicherry: 32:21

I work in a corporate so I don't have to advise. I need to do things my sense! And in discussions I just say people do your bit, don't try and burn the ocean, it won't work. Do what you can do. So as a corporate, you can get rid of paper, get rid of plastic, use renewable energy, use electrical car, recycle, reduce your contribution to the landfill. So do your bit. Focus on what you can do right and don't try too many ambitious things. They don't work. Do small incremental steps and I think that everyone doing one more incremental steps I think, but it's in my view results in hundreds or thousands of steps to do small stuff, you get done.

Karen Plum: 33:10

So don't buy more and do your bit. Two pieces of advice we could all follow. It's a very complex subject, but I love the way my two guests brought us right down to basics at the end of our discussion. I was also really struck by the simplicity of building for the local conditions. Do we really need more glass boxes in a sunny country when that simply means we have to use a lot of energy cooling everyone down? Many thanks to Shashi and Sanjeev for a fascinating look into the world of work and workplace in India, and I feel sure that, as things progress, I'll be revisiting AWA's team in India to see what else we can learn from the approaches their country is adopting. If you'd like to hear future episodes of the DNA of work, just follow or like the show. You can contact us on our website, advanced-workplace. com. Thank you so much for listening. See you next time. Goodbye.