Are CBDs losing sheen to PBDs?


Are the central business districts in the country worth the price, when peripheral locations offer better infrastructure, more space and lower costs? A Housing News analysis

The central business districts (CBDs) in the country, seem to be losing sheen, vis-à-vis being real estate markets that drive economic activities. Critics attribute this to the improving quality of infrastructure on the outskirts of the cities, resulting in a scenario, where the peripheral business districts (PBDs) are now better positioned than the CBDs.

Consequently, PBDs have become the first choice in many of the cities, due to the quality spaces, infrastructure and lower cost of doing business per sq ft. This certainly seems to be the case, if one compares business destinations in Gurgaon with those in Connaught Place or Nehru Place in Delhi-NCR, or BKC and Navi Mumbai with those in Nariman Point in Mumbai.

In Mumbai, ICICI Bank, the National Stock Exchange, Reserve Bank of India, the diamond bourse, the MCA, Asian Heart Hospital, Dhirubhai Ambani International School and the American Consulate, have all set up their offices or shifted to BKC. This does not mean that Nariman Point has lost its sheen completely. However, it is no longer a viable place for small businesses. At the same time, large corporates do not consider it a status symbol, to have their offices in Nariman Point, any more.

 

The advantages that PBDs offer

Kishor Pate, CMD of Amit Enterprises Housing, points out that traditional CBDs tend to have older buildings with less amenities. So, PBDs with better stock tend to draw a lot of the demand now. “Multinationals prefer to take up space in PBDs, if a city has multiple commercial real estate propositions. Office space of every type, is always in demand in PBDs. This drives job creation and thereby, creates demand for residential spaces. Employment catchments that generate jobs in support services for SMEs, trade or transportation companies, will also generate demand for affordable homes, as these employees draw relatively modest salaries,” Pate explains.

See also: Commercial and office demand determine residential realty trends

Yogesh Mehra, CEO and co-founder of YOLO Homes, feels that many PBDs are doing better than the traditional CBDs, as they are cheaper for corporates. “These areas offer lower property rates, larger floor area, better buildings and faster access to cost-effective residential neighbourhoods,” he elaborates.

 

Secondary business districts

Anuj Puri, chairman and country head, JLL India, believes that rather than the CBDs or the PBDs, it is the secondary business districts (SBDs) that command the maximum demand across the country. He explains that a successful business location, needs to be close to residential catchments and also infrastructure, such as roads, airports and public transport.

“SBDs are seeing major traction, in terms of rental appreciation and space take-up and are driving the demand for homes. Most infrastructure projects that have come up in recent times, have been in the suburbs. However, there are still no projects, which connect the central city areas in cities like Mumbai, Delhi and Bengaluru,” says Puri.

Traditional CBDs were designed at a time, when businesses were local and catered to an economy with a GDP of 1%. India is now part of the global economy, with GDP expectations of over 7% and the major cities have no option but to adopt global designs and spaces. Hence, it is no surprise that the PBDs in many cases, have become the first choice for multi-nationals and high profile businesses. Moreover, this situation is likely to persist, until the CBDs reinvent themselves or are redeveloped.

 

CBDs versus PBDs

  • PBDs are preferred over CBDs, as they offer more space, better infrastructure and lower cost of doing business per sq ft.
  • The infrastructure and quality of spaces in most of the CBDs, are not in sync with today’s needs.
  • The outskirts of cities, have witnessed considerable development and greater property supply, which have changed the market’s dynamics.

(The writer is CEO, Track2Realty)

 

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