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City Report Bangalore Office Market Q4 2010

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BNP Paribas Real Estate

There was a significant increase in leasing inquiries in Bangalore during Q4 2010, however the volume of office space transactions witnessed a sharp decline compared to the previous quarter. Approximately 0.8 million square feet of office space was leased during this quarter, compared to 3.7 million square feet in Q3 2010. Rental and capital values increased marginally in the Central Business District due to limited availability, while values faced pressure in suburban and peripheral areas due to high vacancy rates from new construction. Approximately 1.1 million square feet of new office space was added in suburban and peripheral areas during the quarter.

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CITY REPORT BANGALORE OFFICE MARKET Q4 2010
BNP Paribas Real Estate - INDIA All the building blocks BNP Paribas Real Estate - SAS au capital de 329 196 608 € - 692 012 180 RCS Paris - Code NAF 4110B - Siège social : 13, boulevard du Fort de Vaux - 75017 Paris www.realestate.bnpparibas.co.in In India our specialists bring you our expertise in Transaction Advisory, Consulting and Land and Building Valuations. With our international scope and on-the-ground presence, you’ll find the perfect partner that can ensure the success of your real estate project. With BNP Paribas Real Estate, all the pieces come together. BNP Paribas Real Estate and Infrastructure Advisory Services Pvt. Ltd Your contacts in India: Mumbai (Head Office) : +91 22 6138 8088 - Delhi : +91 11 4959 8800 - Bangalore : +91 80 4030 0334 info.india@bnpparibas.com
CONTENTS Summary p. 3 Macroeconomic Context p. 4 Bangalore Map p. 5 Central Business District (CBD) p. 6 Secondary Business District (SBD) p. 7 Periphery Business District (PBD) p. 8 Rental Values & Capital Values p. 9 Key Projects p. 9 Key Transactions p. 10 Glossary p. 11 CITY REPORT BANGALORE OFFICE MARKET - Q4 2010
SUMMARY There has been significant increase in leasing enquiries in Q4 Bangalore is currently witnessing a significant number of of 2010. However, inspite of a steady rise in number of infrastructure projects being implemented, and are under enquiries, the volume of space transacted in the region various stages of development. The Government of witnessed a sharp decline as compared to the previous Karnataka has undertaken the development of 7 flyovers on quarter. During this quarter Bangalore witnessed a the Outer Ring Road to provide seamless connectivity to the cumulative transaction of approx. 0.8 mn sq.ft as compared developing peripheral regions and ease traffic flow to the to approx. 3.7 mn sq.ft. in Q3 2010. existing SBD regions. Once completed these projects are likely to have a positive impact on the demand for real estate The achievable values exhibited a mixed trend. While, as within the region as a whole. there was a marginal increase in rental and capital values within the CBD, there was an increased pressure on the The Phase I of Metro is progressing as per schedule and trial achievable values within the suburban and peripheral run is expected to commence in the last week of January micro-markets. Restricted availability of space options 2011. Planning and land acquisition for the second phase is across the CBD with a steady demand resulted in firming up currently underway and the construction is expected to of rentals within the micro-market. On the other hand, the commence shortly. Similar to other cities the ongoing ongoing construction activity within the SBD and PBD micro- construction activity is likely to have a negative impact on markets with ready availability of large volume of office the demand for surrounding development during the short space has led to increased vacancy levels in these micro- term. However in the long run, the projects in these regions markets. are likely to benefit from the initiatives. During this quarter, approx. 1.1 mn sq.ft of additional space During the past few quarters, Bangalore has witnessed an was added to the existing inventory across the SBD and PBD increased demand for IT SEZ space with many blue-chip areas. At the same time, a total stock of approx. 10 mn sq.ft of companies actively looking at SEZ space. However, currently investment grade office space is currently under various there is a limited supply of ready to move SEZ space in the stages of construction across the city and is likely to be region. This scenario is however likely to change with added to the existing stock by the end of the next year i.e. Q4 significant volume of supply likely to be added in the SBD and 2011. The SBD alone is likely to witness additional supply of PBD areas of Bangalore by mid 2012. approx. 5 mn sq.ft of Grade A office space during the coming Looking forward, the rental and capital values are expected year. Given the existing availability of ready stock with to rise marginally in the CBD area. On the other hand the stagnant demand, some of the developers have slowed down achievable values are likely to be impacted in the SBD areas the pace of construction in their on-going projects. However, such as Bannerghatta Road, Jaya Nagar and JP road due to most of these projects are expected to be completed by end ongoing construction activity of metro rail during the short of 2011. term. Alternatively, based on the growing interest for additional space from the Blue-chip companies, the rentals in PBD are expected to remain stable over the next few quarters. CITY REPORT BANGALORE OFFICE MARKET - Q4 2010 I3I
CRR & SLR MACROECONOMIC CONTEXT 35 GDP growth moderates on account of unanticipated 30 factors 25 Percent 20 The Indian economy, continued on the high growth path in 2010-11 despite an uncertain global environment. Though the overall global outlook 15 suggested some moderation in growth in both advanced and emerging 10 economies in 2011, downside risks to India's growth momentum have 5 receded considerably. However, the GDP grew moderately at 8.2 % during the quarter as compared to 8.8% during the previous two quarters. Significant 0 slowdown in the industrial sector along with marginal downward Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 movement in the services sector were primary factors that led to moderation in the GDP growth, despite of sharp increase in agricultural SLR CRR growth. Modest softening of manufactured products price and pressures aided by Repo & Reverse Repo Rate past monetary tightening by RBI, led to moderation in Wholesale Price Index (WPI) during August-November 2010 relative to double digit levels of 11% 7 experienced during March-July 2010. However, inflationary pressures 6 revived in December 2010 with WPI inflation increasing to 8.4 percent from 5 7.5 per cent in November 2010. These were attributed to unanticipated Percent 4 factors such as unseasonal showers and supply chain factors affecting the 3 prices of essential commodities such as vegetables. New drivers such as 2 Fuel and non-fuel international commodity prices and demand-supply 1 imbalances in some food items emerged as factors impacting the inflation rates. 0 23-Jul-09 23-Aug-09 23-Sep-09 24-Oct-09 24-Nov-09 25-Dec-09 25-Jan-10 25-Feb-10 19-Mar-10 20-Apr-10 20-May-10 20-Jun-10 2-Jul-10 27-Jul-10 20-Aug-10 16-Sep-10 2-Nov-10 Liquidity conditions remained tight during the third quarter of 2010-11, prompting liquidity easing measures being adopted by the Reserve Bank. Repo Under the Liquidity Adjustment Facility (LAF), the RBI increased the repo rate Reverse Repo by 25 basis points from 6.0% to 6.25% and hiked the reverse repo rate by 25 basis points from 5.0% to 5.25%. Conditions for enhancing the efficiency of monetary policy however, improved during the quarter with the tightness in Gross Domestic Product (GDP) liquidity leading to competition among banks, resulting in higher deposit 10.00 8.80% and lending rates. 9.00 8.60% 8.80% 7.90% 8.00 7.60% 8.80% 8.20% Supported by a stable economy, India continued to be high on Global 7.90% 7.00 Investment radar. According to The World Prospectus Survey by the United 5.80% Nations Conference on Trade and Development (UNCTAD), in spite of a dip in Percent 6.00 6.10% 6% 5.00 5.30% the FDI Inflows, India continues to be the second best attractive destination 4.00 for FDI after China. India witnessed a total FDI inflow of USD 16,039 million 3.00 dollars (as on Dec 2010) followed by Singapore and USA at third and fourth 2.00 places. 1.00 Overall, robust and broad – based growth is expected to co-exist with 0.00 elevated inflation in the near term. Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 Major Real Estate Sales (In INR / In million) Profits (In INR / In million) Companies in Q on Q Q on Q India Q4 2010 Q3 2010 Q4 2010 Q3 2010 Change % Change % Wholesale Price Index (WPI) DLF Limited 24,799 23,690 5% 4,657 4,184 11% 18.00 Unitech 6,598 6,445 2% 1,113 1,740 -36% 16.00 India Bulls 5,962 5,414 10% 2,025 1,727 17% 14.00 Sobha Developers 3,629 4,257 -15% 490 589 -17% 12.00 Peninsula Land 1,178 1,226 -4% 621 638 -3% Percent 10.00 Parsvnath 2,198 1,955 12% 314 498 -37% 8.00 Developers 6.00 Pheonix 451 443 2% 238 221 7% 4.00 Omaxe Limited 3,480 3,544 -2% 226 367 -39% 2.00 Mahindra 1,558 890 75% 334 247 36% 0.00 Lifespace Mar-09 Jun-09 Sept-09 Dec-09 Mar-07 Jun-07 Sept-07 Dec-07 Mar-10 Jun-10 Sept-10 Dec-10 Sept-06 Dec-06 Mar-08 Jun-08 Sept-08 Dec-08 Anantraj 2 1.329 -100% 502 480 5% Ackruti City 2,123 1,624 31% 678 557 31% Source: Confederation of Indian Industries Ansal Properties 3,378 3,197 6% 324 199 63% CITY REPORT BANGALORE OFFICE MARKET - Q4 2010 I4I
City Report Bangalore Office Market Q4 2010
City Report Bangalore Office Market Q4 2010
City Report Bangalore Office Market Q4 2010
City Report Bangalore Office Market Q4 2010
City Report Bangalore Office Market Q4 2010
City Report Bangalore Office Market Q4 2010
City Report Bangalore Office Market Q4 2010
City Report Bangalore Office Market Q4 2010

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City Report Bangalore Office Market Q4 2010

  • 2. BNP Paribas Real Estate - INDIA All the building blocks BNP Paribas Real Estate - SAS au capital de 329 196 608 € - 692 012 180 RCS Paris - Code NAF 4110B - Siège social : 13, boulevard du Fort de Vaux - 75017 Paris www.realestate.bnpparibas.co.in In India our specialists bring you our expertise in Transaction Advisory, Consulting and Land and Building Valuations. With our international scope and on-the-ground presence, you’ll find the perfect partner that can ensure the success of your real estate project. With BNP Paribas Real Estate, all the pieces come together. BNP Paribas Real Estate and Infrastructure Advisory Services Pvt. Ltd Your contacts in India: Mumbai (Head Office) : +91 22 6138 8088 - Delhi : +91 11 4959 8800 - Bangalore : +91 80 4030 0334 info.india@bnpparibas.com
  • 3. CONTENTS Summary p. 3 Macroeconomic Context p. 4 Bangalore Map p. 5 Central Business District (CBD) p. 6 Secondary Business District (SBD) p. 7 Periphery Business District (PBD) p. 8 Rental Values & Capital Values p. 9 Key Projects p. 9 Key Transactions p. 10 Glossary p. 11 CITY REPORT BANGALORE OFFICE MARKET - Q4 2010
  • 4. SUMMARY There has been significant increase in leasing enquiries in Q4 Bangalore is currently witnessing a significant number of of 2010. However, inspite of a steady rise in number of infrastructure projects being implemented, and are under enquiries, the volume of space transacted in the region various stages of development. The Government of witnessed a sharp decline as compared to the previous Karnataka has undertaken the development of 7 flyovers on quarter. During this quarter Bangalore witnessed a the Outer Ring Road to provide seamless connectivity to the cumulative transaction of approx. 0.8 mn sq.ft as compared developing peripheral regions and ease traffic flow to the to approx. 3.7 mn sq.ft. in Q3 2010. existing SBD regions. Once completed these projects are likely to have a positive impact on the demand for real estate The achievable values exhibited a mixed trend. While, as within the region as a whole. there was a marginal increase in rental and capital values within the CBD, there was an increased pressure on the The Phase I of Metro is progressing as per schedule and trial achievable values within the suburban and peripheral run is expected to commence in the last week of January micro-markets. Restricted availability of space options 2011. Planning and land acquisition for the second phase is across the CBD with a steady demand resulted in firming up currently underway and the construction is expected to of rentals within the micro-market. On the other hand, the commence shortly. Similar to other cities the ongoing ongoing construction activity within the SBD and PBD micro- construction activity is likely to have a negative impact on markets with ready availability of large volume of office the demand for surrounding development during the short space has led to increased vacancy levels in these micro- term. However in the long run, the projects in these regions markets. are likely to benefit from the initiatives. During this quarter, approx. 1.1 mn sq.ft of additional space During the past few quarters, Bangalore has witnessed an was added to the existing inventory across the SBD and PBD increased demand for IT SEZ space with many blue-chip areas. At the same time, a total stock of approx. 10 mn sq.ft of companies actively looking at SEZ space. However, currently investment grade office space is currently under various there is a limited supply of ready to move SEZ space in the stages of construction across the city and is likely to be region. This scenario is however likely to change with added to the existing stock by the end of the next year i.e. Q4 significant volume of supply likely to be added in the SBD and 2011. The SBD alone is likely to witness additional supply of PBD areas of Bangalore by mid 2012. approx. 5 mn sq.ft of Grade A office space during the coming Looking forward, the rental and capital values are expected year. Given the existing availability of ready stock with to rise marginally in the CBD area. On the other hand the stagnant demand, some of the developers have slowed down achievable values are likely to be impacted in the SBD areas the pace of construction in their on-going projects. However, such as Bannerghatta Road, Jaya Nagar and JP road due to most of these projects are expected to be completed by end ongoing construction activity of metro rail during the short of 2011. term. Alternatively, based on the growing interest for additional space from the Blue-chip companies, the rentals in PBD are expected to remain stable over the next few quarters. CITY REPORT BANGALORE OFFICE MARKET - Q4 2010 I3I
  • 5. CRR & SLR MACROECONOMIC CONTEXT 35 GDP growth moderates on account of unanticipated 30 factors 25 Percent 20 The Indian economy, continued on the high growth path in 2010-11 despite an uncertain global environment. Though the overall global outlook 15 suggested some moderation in growth in both advanced and emerging 10 economies in 2011, downside risks to India's growth momentum have 5 receded considerably. However, the GDP grew moderately at 8.2 % during the quarter as compared to 8.8% during the previous two quarters. Significant 0 slowdown in the industrial sector along with marginal downward Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 movement in the services sector were primary factors that led to moderation in the GDP growth, despite of sharp increase in agricultural SLR CRR growth. Modest softening of manufactured products price and pressures aided by Repo & Reverse Repo Rate past monetary tightening by RBI, led to moderation in Wholesale Price Index (WPI) during August-November 2010 relative to double digit levels of 11% 7 experienced during March-July 2010. However, inflationary pressures 6 revived in December 2010 with WPI inflation increasing to 8.4 percent from 5 7.5 per cent in November 2010. These were attributed to unanticipated Percent 4 factors such as unseasonal showers and supply chain factors affecting the 3 prices of essential commodities such as vegetables. New drivers such as 2 Fuel and non-fuel international commodity prices and demand-supply 1 imbalances in some food items emerged as factors impacting the inflation rates. 0 23-Jul-09 23-Aug-09 23-Sep-09 24-Oct-09 24-Nov-09 25-Dec-09 25-Jan-10 25-Feb-10 19-Mar-10 20-Apr-10 20-May-10 20-Jun-10 2-Jul-10 27-Jul-10 20-Aug-10 16-Sep-10 2-Nov-10 Liquidity conditions remained tight during the third quarter of 2010-11, prompting liquidity easing measures being adopted by the Reserve Bank. Repo Under the Liquidity Adjustment Facility (LAF), the RBI increased the repo rate Reverse Repo by 25 basis points from 6.0% to 6.25% and hiked the reverse repo rate by 25 basis points from 5.0% to 5.25%. Conditions for enhancing the efficiency of monetary policy however, improved during the quarter with the tightness in Gross Domestic Product (GDP) liquidity leading to competition among banks, resulting in higher deposit 10.00 8.80% and lending rates. 9.00 8.60% 8.80% 7.90% 8.00 7.60% 8.80% 8.20% Supported by a stable economy, India continued to be high on Global 7.90% 7.00 Investment radar. According to The World Prospectus Survey by the United 5.80% Nations Conference on Trade and Development (UNCTAD), in spite of a dip in Percent 6.00 6.10% 6% 5.00 5.30% the FDI Inflows, India continues to be the second best attractive destination 4.00 for FDI after China. India witnessed a total FDI inflow of USD 16,039 million 3.00 dollars (as on Dec 2010) followed by Singapore and USA at third and fourth 2.00 places. 1.00 Overall, robust and broad – based growth is expected to co-exist with 0.00 elevated inflation in the near term. Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 Major Real Estate Sales (In INR / In million) Profits (In INR / In million) Companies in Q on Q Q on Q India Q4 2010 Q3 2010 Q4 2010 Q3 2010 Change % Change % Wholesale Price Index (WPI) DLF Limited 24,799 23,690 5% 4,657 4,184 11% 18.00 Unitech 6,598 6,445 2% 1,113 1,740 -36% 16.00 India Bulls 5,962 5,414 10% 2,025 1,727 17% 14.00 Sobha Developers 3,629 4,257 -15% 490 589 -17% 12.00 Peninsula Land 1,178 1,226 -4% 621 638 -3% Percent 10.00 Parsvnath 2,198 1,955 12% 314 498 -37% 8.00 Developers 6.00 Pheonix 451 443 2% 238 221 7% 4.00 Omaxe Limited 3,480 3,544 -2% 226 367 -39% 2.00 Mahindra 1,558 890 75% 334 247 36% 0.00 Lifespace Mar-09 Jun-09 Sept-09 Dec-09 Mar-07 Jun-07 Sept-07 Dec-07 Mar-10 Jun-10 Sept-10 Dec-10 Sept-06 Dec-06 Mar-08 Jun-08 Sept-08 Dec-08 Anantraj 2 1.329 -100% 502 480 5% Ackruti City 2,123 1,624 31% 678 557 31% Source: Confederation of Indian Industries Ansal Properties 3,378 3,197 6% 324 199 63% CITY REPORT BANGALORE OFFICE MARKET - Q4 2010 I4I