The landscape of co-working spaces in India is undergoing a significant transformation as providers increasingly invest in Environmental, Social, and Governance (ESG) initiatives. Prominent co-working space providers such as Urban Vault, Incuspase, The Executive Centre, and Office are leading this trend, driven by the growing demand for ESG-compliant workplaces and the potential for higher rental returns.

The Surge in ESG-Compliant Workspaces

India’s commitment to achieving net-zero carbon emissions by 2070 has spurred a notable shift in the real estate sector, with companies prioritizing sustainability in their leasing decisions. Urban Vault, a Bengaluru-based co-working space provider, reported a 41 percent increase in rent for ESG-certified properties during the third and fourth quarters of FY 24. This surge highlights the increasing importance of ESG standards in the corporate world.

Amal Mishra, Chief Executive Officer of Urban Vault, emphasized the growing demand for ESG-certified properties. “Urban Vault has seen a significant increase in the demand for ESG certified properties. Sustainability is now being incorporated as a key parameter in almost all conversations for office spaces. With the increasing number of GCCs (global competence centres) in India, ESG compliance has become a norm. We are investing in ESG compliant projects to meet the growing demand. Companies are looking for office spaces that can contribute to their overall sustainability strategy and goals.”

Urban Vault plans to invest Rs 40 crore in various ESG initiatives in FY25, a substantial increase from the Rs 10 crore invested in the previous fiscal year. Mishra added, “Given our robust plan to double our capacity in the next 24 months, leasing ESG certified properties is one of our key priorities. Also, having ESG certified properties gives us an advantage.”

The Competitive Edge of ESG Investments

Delhi-based competitor Incuspase echoes the sentiment, noting a 7-9 percent difference in rental prices between ESG-compliant and non-compliant buildings. The government supports the construction of green buildings by offering various incentives such as rebates and additional floor area ratio (FAR).

Sanjay Chowdhary, Founder and CEO of Incuspase, elaborated on their key ESG practices: “Our key ESG practices include implementing technologies such as LED lighting and energy-efficient HVAC systems, and conducting regular energy audits to identify areas of improvement. We also prioritise sustainable design by using eco-friendly materials and construction practices, and designing workspaces to maximise natural light and minimise reliance on artificial lighting.” Incuspase plans to invest Rs 75 crore in ESG initiatives, covering 5,00,000 sq ft of area for sustainable development. The company has already leased 2.20 lakh sq ft of office space within ESG-compliant buildings.

The Future of Co-Working Spaces

As the demand for ESG-compliant workspaces continues to rise, co-working space providers are positioning themselves to meet the growing needs of companies focused on sustainability. The investments made by Urban Vault and Incuspase underscore the increasing importance of ESG standards in the commercial real estate sector. By aligning their offerings with global sustainability goals, these providers are not only enhancing their market appeal but also contributing to India’s broader environmental objectives.

The future of co-working spaces in India looks promising, with a strong emphasis on sustainability and ESG compliance. As more companies incorporate ESG into their core strategies, the co-working sector is poised to play a crucial role in shaping a greener, more sustainable corporate landscape.