Sustainability Drives Higher Rentals: Co-Working Spaces Increase ESG Commitments
- Shivam Mittal (Manager – Investment & Research)
Co-working spaces across India, including prominent players like Urban Vault, Incuspaze, and The Executive Centre (TEC), are ramping up investments in Environmental, Social, and Governance (ESG) initiatives, responding to the growing demand for sustainable workspaces. As businesses, particularly Global Capability Centres (GCCs), expand their operations in India, sustainability has emerged as a major factor influencing corporate leasing decisions. Urban Vault, headquartered in Bengaluru, reported a significant 41% increase in rentals for ESG-certified properties in the latter part of FY24, underlining this shift. CEO Mr. Amal Mishra highlighted that sustainability is now central to how companies evaluate office spaces, as global organizations prioritize eco-friendly, energy-efficient environments. Recognizing this trend, Urban Vault is set to quadruple its investment in ESG practices, allocating US$ 4.8 million (Rs. 40 crore) in FY25 to enhance its portfolio of sustainable properties and cater to this rising demand.
Similarly, Incuspaze, based in New Delhi, has observed a tangible difference in rental values, with ESG-compliant buildings commanding a 7-9% premium over their non-compliant counterparts. Founder Mr. Sanjay Choudhary emphasized Incuspaze's commitment to energy-saving technologies, sustainable design, and green building practices. To support this vision, the company has earmarked an impressive US$ 9 billion (Rs. 75 crore) for ESG-focused projects, aiming to cover 500,000 square feet of space with state-of-the-art, eco-friendly solutions. The proactive stance of Incuspaze reflects a broader shift in the commercial real estate sector, where green infrastructure is increasingly viewed as a competitive advantage, attracting both domestic and international clients seeking spaces that align with their sustainability goals.
The Executive Centre (TEC) is also experiencing increased interest in green buildings, reporting a 3-5% rental premium for such properties. Managing Director Mr. Manish Khedia noted that the demand for sustainable office spaces is driven not only by corporate preferences but also by evolving regulatory frameworks. TEC plans to allocate 5-8% of its total investment towards ESG initiatives, recognizing that the availability of green buildings will be key to enhancing India’s global competitiveness in the office space market. Mr. Khedia stressed the importance of expanding the supply of ESG-compliant properties to meet the growing expectations of international companies and align with global sustainability standards. By integrating sustainability into their core operations, co-working spaces like TEC are not only fulfilling immediate demand but also positioning themselves for long-term success in an increasingly eco-conscious business landscape.
As the shift towards sustainable office spaces gains momentum, these co-working companies are poised to lead the transformation of India’s real estate market, where ESG compliance is becoming synonymous with business growth, environmental responsibility, and enhanced corporate reputations.