As India’s commercial real estate sector continues to evolve, the concept of “relevant grade” office projects has gained significant traction. These developments are redefining the landscape of commercial workspaces across the top seven cities in India. Relevant grade projects are equivalent to premium grade / A+ grade projects based on JLL’s definition.  A key driver of this transformation is relevant office spaces which are based on project quality assessment, ownership, age and upkeep, tenant quality, current rent and growth, sustainability certifications and other relevant factors. In recent years, India has witnessed a major shift in occupier preferences towards relevant grade office projects. Currently, the relevant stock across the top seven cities in India stands at ~465 mn sq ft, which is 56.3% of the total grade A office market in the country.

The performance of relevant grade projects can be measured through the following two parameters:

Figure 1: Much lower vacancy rate compared to others

Source: JLL Research & REIS

Over the analysis period, relevant grade projects across the top seven cities have witnessed lower vacancies compared to other grade projects. Since 2019, vacancy levels in both categories have significantly increased, largely due to higher completions over the past 3-4 years. Although the stock in relevant grade projects has grown at a faster rate (8.0% CAGR) compared to the other grade projects (5.2% CAGR) since 2019, the vacancy levels in the relevant grade projects remain low. Interestingly, the gap between vacancy levels has widened during H1 2024 with vacancies in relevant grade projects being 940 bps lower than other grade projects, backed by increased occupier demand.

Amongst cities, Bengaluru dominates the market for relevant grade projects, accounting for 28.5% of the total stock. Hyderabad follows at 17.9%, Mumbai at 13.8%, and Delhi NCR at 13.1%. Regarding vacancy differences, Delhi NCR shows the largest gap, followed by Kolkata, Bengaluru, and Hyderabad. In Pune and Chennai, the higher vacancy rates in relevant grade projects are primarily due to high vacancy levels in newly completed and SEZ projects.

Figure 2: Higher Rental Premiums

Source: JLL Research & REIS

An analysis of the average rental values of relevant grade projects across India reveals that these properties continue to command a premium over other grade projects. Over time, the average rental values in these projects have experienced rapid growth. As of H1 2024, relevant grade projects across India command an average rent of INR 92.4 per sq ft per month, representing a 19.8% premium over other grade projects. This premium has grown significantly from 14.7% in 2019.

As the Indian office market continues to mature, relevant grade projects are expected to play a crucial role in meeting the diverse needs of occupiers and investors. Their ability to offer quality spaces at competitive prices positions them well for sustained growth in the coming years.

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