Why new business districts are springing up around India’s airports

Airport-adjacent locations are rarely tipped as the chicest spots of city. But in India’s megalopolises, where space is tight, companies are increasingly looking to uproot from the main business districts in favor of the airport.

November 19, 2018

New districts near the main airports in Mumbai and Delhi aren’t just for layovers. They’ve got luxury hotels, dining options, and offices of major international firms.

“There’s a lot of demand for commercial space near the Mumbai and Delhi airports,” says Vishal Ahuja, India Head – Private Wealth Group and Mumbai Head – Capital Markets. “They offer what occupiers need: manpower and good connectivity.”

Aerocity, near New Delhi International Airport, has drawn companies like Accenture, Airbus, Kotak Mahindra Bank, Bank of Tokyo-Mitsubishi and EY.

The Bandra Kurla Complex (BKC), near the Mumbai International Airport, is where Google, Abbot and Pfizer call home. It’s also where government agencies such as the Securities and Exchange Board of India (SEBI), National Stock Exchange of India (NSE), Reserve Bank of India (RBI), and banks like Deutsche Bank, ICICI Bank, Citi Bank and Bank of America, have leased office space.

The draw has upended rent dynamics in Mumbai, where office space in the main business district is lower than out near the airport. Average office rent in Mumbai’s CBD is around INR200 (US $2.78) a square foot per month, according to JLL data. In BKC, the average office rent is INR260 (US $3.61) a square foot per month.

More than just offices

It’s not just newly-built Grade A offices that have made these districts sought after. Shopping and food and beverages options for grab-and-go and sit-down lunch have cropped up as well, increasing the appeal of airport areas yet further.

Similarly, prominent hotel brands across luxury, mid-segment and budget segments offer a variety of fine dining options to visitors coming to the Aerocity. Famous names include Pullman, Novotel, Holiday Inn, IBIS, JW Marriott Hyatt Andaz.

Though limited, transportation options are increasing for consumers. For instance, Aerocity is very well connected with the metro rail network. New electric passenger buses have been planned for commute to BKC from neighboring locations. Also, ongoing projects in the region such as the one on the flyover connecting BKC to Chunabhatti and the widening of the CST Road to MTNL junction, will further improve the connectivity.

However, there are challenges to a congestion free commute; take the case of New Delhi. The development work on roads around the Delhi airport has created bottlenecks on some sections of the National Highway 8.

“Even in Mumbai, there is tremendous focus on infrastructure development. With the ongoing Metro railway work across Mumbai city, traffic congestion is witnessed across micro-markets. Once functional, metro railway is expected to change the commute pattern of people in Mumbai,” adds Ahuja.

Once these regions are congestion free, occupiers can cut their real estate spend and come closer to clients and consumers.

The way forward

Mumbai and Delhi are paving the way for other airports in India. Two additional airports have already been planned in Greater Noida and Navi Mumbai, the satellite cities to New Delhi and Mumbai, respectively. Once complete, they are likely to lessen the burden on the already existing airports.

Navi Mumbai Airport that is slated to be complete by 2019, will have a similar integrated commercial development. The City and Industrial Development Corporation (CIDCO) has recently floated tenders inviting bids from private companies to develop a residential-cum-commercial complex. The news on proposed airports has already been used as a selling factor in these regions.

“Their development and completion will not only increase the connectivity in the region but will also provide impetus to the trade and logistics within the region by removing the barriers of poor connectivity in the medium to long-term with other neighboring states,” adds Ahuja.

In addition to these, other emerging metros such as Chandigarh, Hyderabad, Amravati etc. have also been planning similar developments.

“However, bigger investments along with wider public-private participation is the need of the hour,” Ahuja adds.

And the scope of development is huge. The Airports Authority of India (AAI), which owns most of the country’s 125 airports, holds 50,000 acres of urban airport land. If utilized, this would free up more space for numerous such integrated commercial developments around the country.

“The development should be done keeping in mind the long-term needs of an expanding business base in these metros,” adds Ahuja.