Bangalore: Grade A Office
Demand
Bangalore continued to witness increased market activity in 4Q10. Transaction volumes have improved significantly compared to that in the previous quarter. The improvement in transaction activity can be attributed to the stabilising macroeconomic situation, positive business environment outlook and the strengthening domestic market conditions.
The Bangalore office market recorded total transactions of about 2.58 million sq ft (240,131 sqm) in 4Q10.
Key transactions in 4Q10 included the following:
- Microsoft leasing 154,043 sq ft (14,311 sqm) in Cosmo Lavelle, Lavelle Road, CBD;
- Amazon leasing 57,800 sq ft (5,370 sqm) in Brigade North Star, Rajajinagar, SBD;
- ACS leasing 223,993 sq ft (20,810 sqm) in Divyasree Technopolis, Old Airport Road, SBD;
- EMC2 leasing 113,000 sq ft (10,498 sqm) Bagmane World Trade Center-Phase II, Outer Ring Road, SBD; and
- APC leasing 39,000 sq ft (3,623 sqm) in Kalyani Platina – Phase II, Whitefield.
Supply
A total of 1.3 million sq ft (123,328 sqm) of office stock was added to the CBD and SBD micro-markets in 4Q10. Three buildings – Salarpuria Cosmolavell, Zenith in the CBD and North Star in the SBD – were completed over the same period.
Asset Performance
The average rent for office space in the CBD increased from INR 74 per sq ft per month in 3Q10 to INR 76 per sq ft per month in 4Q10; and in the SBD, rental values increased from INR 38 per sq ft per month in 3Q10 to INR 40 per sq ft per month in 4Q10.
12-Month Outlook
We expect the improving demand trend to continue over the coming quarters. Encouraging business sentiment, prospects of a global economic growth and expected long-term growth in domestic markets will play a pivotal role in enhancing the demand for office space in the city.
Gross rents and capital values across the CBD and SBD micro-markets increased during 4Q10. This trend is expected to continue in the near term as there is still growing demand but limited ready-to-occupy office space in the CBD and SBD areas.
Bangalore: Retail Market
Demand
Vacancy levels in prime malls remained unchanged, with no new supply and no absorption activity recorded as 100% of the retail space in prime city malls has been taken up. Vacancy levels in secondary malls increased from 2.3% in 3Q10 to 4.1% in 4Q10.
Key transactions in 4Q10 included the following:
- Madura Garments leasing 6,300 sq ft (585qm) in Koramangala, high street;
- Office Depot leasing 3,000 sq ft (279 sqm) in Indiranagar, high street;
- The Zone leasing 2,750 sq ft (255 sqm) in Whitefield, high street; and
- ING Vysya leasing 1,615 sq ft (150 sqm) in Banashankari, high street.
Supply
The fourth quarter of 2010 witnessed the completion of Innovation Mall by Gopalan Group along Bannerghatta Road. The future mall supply, which is expected to be completed in Bangalore between 2011 and 2013, stands at 6.89 million sq ft (640,103 sqm).
Asset Performance
There were no corrections in ongoing rentals in the Prime City and Secondary micro-markets in Bangalore during the fourth quarter. The average rental for prime malls remained at INR 178 per sq ft per month. Meanwhile, average rental for the Secondary micro-market was at INR 85 per sq ft per month in the quarter.
12-Month Outlook
Demand is expected to gain momentum in 2011, with projects that are at their final stages of completion likely to see acceleration in construction activity.
Rental and capital values will likely increase across the malls in Bangalore during 2011. This rental and capital value appreciation is expected in the Prime micro-market as there is no fresh supply in the pipeline amidst growing demand. In Suburban malls, rental and capital value appreciation is expected due to the ongoing leasing activity in upcoming malls at above micro-market average, especially in Park Square by Ascendas and Market City by Phoenix Mills in Whitefield.
