Secondary business districts (SBDs) are on a fast track towards becoming the preferred choice of business centres for companies. The quality of supply in these locations along with the infrastructure in place to support the large developments, have considerably changed the market dynamics in most cities. Added with the advantage of lower cost of doing business that most SBDs offer, these micro markets are now becoming the first choice for occupiers looking for commercial office space in the city. Especially in the larger cities of the country, SBD locations like Outer Ring Road in Bangalore and Bandra Kurla Complex (BKC) in Mumbai have clearly outpaced their central business district (CBD) counterparts in terms of economic activity.
SBDs are seeing a significant amount of traction in terms of space uptake and rental appreciation. Last year in 2016 in Mumbai, roughly 5 times space was absorbed in Andheri East compared to the CBD locations of Nariman Point, Fort and Ballard Estate. Each of the locations of Andheri east and BKC have witnessed grade A supply of close to 5 million sq ft in the last 3 years. At the same time, there has hardly been any new supply and none expected in the next 2-3 years as well in the CBD areas. The demand supply dynamics clearly indicate the way forward for each of these locations.
Space is one of the primary factors leading corporates to move towards the SBD locations. Availability of larger floor plates enables companies to scale up easily. In the race for attracting talent and employee retention, companies are able to offer better workplace areas to their employees. Additionally, most of the SBD locations are located close to residential pockets, thus reducing travel time to work. Better infrastructure, more security and good connectivity to other parts of the city are key drivers that make SBDs score high and attract more occupancy.
With the growing prominence of occupiers keen on operating out of the secondary business locations, there has been movement of front office functions of companies from the CBD areas to the SBD areas while the back office functions have been moved to the much cheaper suburban or peripheral locations. This increasing interest in the SBD locations has prompted even institutional investors to invest in these areas.
Therefore, SBDs are poised towards becoming primary business centres very soon.