Oberoi Realty’s Commerz III looking to close remaining 2.4 mn sq ft of commercial space in next 2-3 years: CEO

Oberoi Realty’s Commerz III looking to close remaining 2.4 mn sq ft of commercial space in 2-3 years: CEO

Oberoi Realty’s Grade A commercial development Commerz III,  located in Oberoi Garden City, Goregaon, Mumbai is expected to be complete by March 2024. While 1.6 mn sq ft space has been leased to global investment bank Morgan Stanley, the company is hoping that the closure for the remaining 2.4 mn sq ft of space may be achieved in the next two to three years.

“We are in active discussions with clients who are keen to take up commercial space closer to the construction nearing completion which is almost five to six months away. We are hoping that the closure for the remaining 2.4 mn sq ft may be achieved in another two to three years,” Pankaj Gupta, CEO, Commercial Real Estate, Oberoi Realty Ltd told Moneycontrol.

“We have a significant amount of inventory that is coming up and we are in active discussions with a lot of prospective clients. We want to offer this building for fit-outs now as we are expecting the building to be  completed by March,” he said.

He said that the company has been receiving enquires from varied clients - flex space companies,  pharma, technology firms and education firms among others and expects upbeat demand. It will also consider foraying into Delhi if there is a good opportunity.

The total footprint of this 51-storey development is 4 mn sq ft chargeable (of which 1.6 million sq ft has been already leased). Commerz I and II account for another one million which makes it a five mn sq ft portfolio.

“The lower zone floors have been taken up by Morgan Stanley and higher zone will be leased out,” he said.

The rents vary, from Rs 160 to Rs 170 per sq ft, market sources told Moneycontrol.

Companies scouting for consolidated Grade A office space

He said that most companies looking for office space in Grade A commercial buildings are those that have been  operating from buildings that are 10-12 years old.

“They have offices scattered across buildings. They have been facing challenges in terms of access, compliance and the floor plate area. All these factors led them to look at setting up offices in a Grade A office space such as this. Besides the facilities, we offer an additional advantage of being located closer to the residential catchment area. The talent  pool resides in proximity besides there being better infrastructure and connectivity,” he told Moneycontrol.

The company offers multiple floor plate options ranging from 30,000 sq ft to 90,000 sq ft. “Primarily clients that  are looking at consolidating their offices are those that have offices scattered at varied places. That is what Morgan Stanley did and that is what other clients are doing and that is where the growth is,” he said, adding, Commerz  III offers floor plates of sizes 90,000 sq ft, 70,000, 30,000 and 40,000 sq ft on the top and mid-level floors.

Gupta said that companies wanting to consolidate are not just international firms but also domestic companies such as Indian banks, research and manufacturing firms. “They have all evinced interest in this office space,” he said.

Besides consolidation, it is also expansion that is driving these companies to scout for modern Grade A office space, he said. “They have run out of space, are wanting to consolidate and hire more staff. Everyone is looking at how they can consolidate into a single floor plate or two,” he added.

Commerz III comprises seven zones. There are as many as 52 lifts in the building. Clients taking up larger floor plates get a dedicated lift zone. The building also has three floors of parking in the basement.

“With Commerz III getting completed, Oberoi Realty is also introducing a significant retail area dedicated to commercial offices spread across  25,000 to 30,000 sq ft. “This will include food courts, restaurants, a gymnasium and other facilities catering to the office crowd. Construction work on this has already started,” he said.

Commenting on Grade A office supply, Gupta said that there is limited new supply in this segment. “Going forward this supply is likely to come up in and around Worli, Bandra Kurla Complex and western suburbs such as Goregaon,” he said.

There are three commercial buildings that are part of Oberoi Realty’s international Business Park - Commerz 1 that is a part of the hotel development and has 17 floors of offices and Commerz 2 which has 30 floors. These buildings have been leased out.

On plans for other commercial land parcels in the city, Gupta said that the company is “witnessing good amount of traction in Grade A commercial assets. We have reasonably large tracts of land and wherever there is definite scope to do commercial we will definitely evaluate. Right now, we do not have any concrete plans at any other sites except Goregaon.” He refused to divulge the amount invested on the entire project.

Expansion plans

The company may consider making a foray into Delhi if there is a good opportunity.

“Currently, we will continue to operate in Mumbai. The focus is currently on Mumbai. We are looking at expansion. If we get something in Delhi, the focus will be to look at an integrated development. We are open to expanding to Delhi provided there is a good opportunity,” he said, adding there is nothing on ground yet.

On REITS

He said that it is “early days for the company to be discussing REITS. We are yet to reach a critical mass.”

Retrofitting old buildings

Gupta said that while there were several developers who were looking at retrofitting assets that are 15 years old and introducing changes to the equipment, lobby upgrades, elevation changes etc, “the company (Oberoi Realty Limited) prefers to focus on greenfield projects where it is in control of the design and can see or envisage a building coming up. Commerz 1 is 13 to 14 years old but is at par with any new grade A building that may have come up. It does not make sense to acquire a Grade B building and upgrade it. The increment will not justify the capex,” he added.

Green initiatives

The company is working on sustainability initiatives such as reduced dependence on packaged water, waste management and LEED Platinum certification among others. “All our clients have their own ESG targets that have to align with the developer where they are occupying office space,” he added.

(The story has been updated with revised information)