RMZ eyes 12 msf office space in 2024, 50 msf by 2029

The office segment, which accounts for around 75% of the brand’s overall revenue presently, will continue to dominate its business till 2025, Govindraj informed.

Bengaluru: Bengaluru-headquartered private developer RMZ proposes to develop 12 million square feet (msf) of office space this calendar year, and its aspiration is to take the metric to 50 msf by 2029, chief executive of its office vertical Thirumal Govindraj told DH during an exclusive interaction.

The office segment, which accounts for around 75 per cent of the brand’s overall revenue presently, will continue to dominate its business till 2025, Govindraj informed.

However, the realty major is in the midst of a portfolio diversification, following the November 2023 launch of four new verticals namely RMZ Living, RMZ Mixed Use, RMZ Hospitality and RMZ Industrial & Logistics. The company had then announced an ambitious target of doubling its rent-yielding business to over Rs 3 lakh crore, with fresh investment of around Rs 58,000 crore in alternate asset classes by 2029.

The four verticals recently added to the company’s portfolio are fully set up and likely to commence operations in coming months. In the five year timeframe, the industrial and logistics segment will see development to the tune of 62 msf, alongside 15 msf in the mixed use vertical. This will be in conjunction with development of over 10 hotel properties and 5 condos.  

In 2023, the office segment clocked a 35 per cent year-on-year growth to over Rs 10,000 crore in revenues. Owing to the cyclic nature of the real estate business, this metric will moderate to 20 per cent in the current calendar.

These projects will be funded by the Menda family in collaboration with existing or new external partners, besides bank loans. Opportune asset sale also remains an option on the table, Govindraj said.

Sectorally, technology and banking, financial services and insurance comprise the brand’s largest client markets presently. However, Govindraj attested to the entrance of several new players since 2021.“In our existing buildings, 60-70 per cent of all the deals we’ve done are for first time users,” Govindraj said.

“For us big clients at one time were the big names. Today, the clients who’re coming to India may be small but will become big tomorrow,” he added.

While the executive is bullish on the growth in office space absorption in 2024, he does not foresee a reduction in construction costs, despite expected interest rate cuts.

“India is still a very undervalued market…The market will go up and cost of construction is not going to come down,” he said, adding that the cost of incorporating sustainable features will compensate for the decline in brick and mortar expenditure. 

Elaborating on the top three challenges in the office realty market, Govindraj listed lukewarm international investment sentiment towards the Indian market, slow regulatory approvals and land availability and pricing.

“We should have a very strong redevelopment policy. That is something, as a country, we have not touched on, redeveloping and repurposing,” he highlighted.

Going forward, RMZ Office will continue its focus on building large office parks and opportunistic standalone facilities in lucrative markets like Mumbai. “We as a company do a very small percentage of flex offices…End use clients are always a stronger covenant to have for funding, banks also give you better rates if you have better clients,” he said.

While the company assesses international markets for expansion from time to time, the focus in the near future will be domestic and a market debut is not on the company’s priority list, Govindraj said.