india major report - bangalore - star that shines the brightest march 2016
TRANSCRIPT
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THE STAR THAT SHINESTHE BRIGHTEST
INDIA
C B RE RE SE ARC H RE PORT | 2016
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BIRTH OF ATECHNOLOGYTITAN
BANGALOREOFFICEMARKET KEYHIGHLIGHTS
EMERGING TRENDSIN BANGALORESOFFICE LEASINGMARKETS
INTRINSIC STRENGTHSTHAT DRIVE BANGALOREAS INDIAS PIVOTALCOMMERCIAL HUB
BANGALORES LEADINGOFFICE NODES
RECOMMENDATIONSFOR OCCUPIERS ANDDEVELOPERS
REBOOTINGINFRASTRUCTURETO SUPPORT THEDEVELOPMENT CURVE
COMPARINGCORPORATE HUBS:HOW DO BANGALORESOFFICE HUBS STACK UPAGAINST EACH OTHER?
MARKET OUTLOOK
04
12
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CONTENTS
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Bangalore leads commercial office stock amongtop three tier-I cities in India
Bangalore attracts highest absorption of officespace among top three tier-I cities in India
Office Market Stats
Bangalore recorded office spaceabsorption of
Mumbai recorded office spaceabsorption of
Delhi NCR recorded office spaceabsorption of
12
(mn sq . f t. ) (mn sq . f t. )
4
9 6
2015 2011vs
9
3
Bangalore offers lowest prime rent among top threetier-I cities in India 2015
Prime rent in Bangalore stands at
Prime rent in Mumbai stands at
Prime rent in Delhi NCR stands at
108
(INR/sq.ft./Month) (INR/sq.ft./Month)
250
295 295
2015 2011vs
95
270
Bangalore office space stock at
Mumbai office space stock at
Delhi NCR office space stock at
127
(mn sq . f t. ) (mn sq . f t. )
87
95 67
2015 2011vs
88
62
CitySnapshot 2,190 sq km
Geographical spread
Bangalore remains Indias3rd most populous cityand 5th most populous urbanagglomeration.
6.5 mn
2001 2011 2021(P)
9.6 mn
14.2 mn
Population Stats
PopulationDensity
(populationper sq km)
4,384Urban
Population
90.9%No. of
Households
2,377,305Highest
per capitaIncome in
India
INR 9,200.Literacy
Rate
87%of (33 out of 58)CMM (Capability
Maturity Model) Level5 companies in India
are established inBangalore
58%
IT/ITES BiotechnologyAerospaceand Aviation
Manufacturing GoodConnectivity
OperationalMetro
SocialInfrastructure
Bus Network
LeadingIndustry
AdvantagesPolitically Stable Talent Pool3rd most
populous cityin India
Drivers
KeyCommercialHubs
Rentalleaders
Outer Ring Road (ORR), Whitefieldand North Bangalore
Bangalore Tops India Marketsin 2015 and 2014
Absorption activity
Supply addition
12.2 mn sq. ft.2015 with 32%share;11 mn sq. ft.in 2014 with 35%share
12.7 mn sq. ft.2015 with 33% share;12 million sq. ft in 2014 with 38%share
CBD, Whitefield : 12% (y-o-y)
Outer Ring Road, EBD : 21% (y-o-y)
North Bangalore: 11% (y-o-y)
*Source: Census of India 2011, Population Projection for Karnataka 2012 2021 by Directorate of Economics and Statistics, Bangalore, 2013.
BANGALORE: A MACRO VIEW
CBRE RESEARCH
This report was prepared by the CBRE India Research Team, which forms part of CBRE Researcha network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate.
CBRE Ltd. 2016 Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility toconfirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.
*The timeline are mentioned as per Calendar year beginning January to December
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As Indias technology sector expands its horizons, Bangalore has emerged as a dominant
growth frontier offering the countrys new economy sectors such as information
technology, biotechnology, pharmaceuticals, manufacturing and other services sectors,
a new growth paradigm. In the last two decades or so, Bangalore has transformed
from being a Pensioners Paradise to Indias Silicon Valley, becoming the hub of
research and innovation. It started during the 1950s and 1960s, when Bangalore
witnessed industrial transformation with the setting up of public sector enterprises
such as Hindustan Machine Tools (HMT) and Bharat Electronics Ltd. (BEL) and
private sector enterprises such as MICO et al. During the early 1980s, the
Karnataka State Electronics Development Corporation established a n industrial
park known as Electronics City in the Southern outskirts of Bangalore. This was
followed by the establishment of the Software Parks of India regime in the city
during the software boom in the 1990s, offering incentives to the still nascent
IT industry to strengthen its base and evolve. Over the years, Bangalore
witnessed the advent of its information technology sector with significant
investments flowing into the city mainly attributable to its intrinsic strengths
such as a salubrious weather, pro-industry Government policies, presence
of prominent educational/science research institutions and abundant
skilled talent pool. The last factor being instrumental in attracting back-
office operations and shared services platforms of global corporates into
the city.
Consequently, in little over two decades, prominent corporates such
as CISCO, IBM, Microsoft, Cognizant, Sun Microsystems, Hewlett
Packard, amongst others, have established a large footprint in
the city; thereby driving the citys commercial office market. The
development of the International Tech Park in Western hub of
Whitefield in the late 90s, as a joint collaboration with the
Government of Singapore, further attracted prominent globalcorporates such as SAP, Dell, Oracle, Shell, Aviva, GE, amongst
others.
Availability of good quality office spaces at affordable rentals,
presence of skilled manpower and improved connectivity
BIRTH OF ATECHNOLOGYTITAN
facilitating easy access to different nodes of the city, further
stimulated office space demand in the city over the past few
years. Persistent demand for office space from technology
firms spurred growth of commercial real estate market
in Bangalore, positioning it as one of the leading office
destinations across the country. With completion of numerous
larger sized technology parks and special economic zones,
Bangalores commercial office stock has grown exponentially
from less than 20 million sq. ft. in early 2000s to 127 million
sq. ft. in 2015; a 13% (CAGR) growth over the last 15 years.
This places the city well ahead of leading Indian office hubs
such as Delhi-NCR (National Capital Region) (90 million sq.
ft.), Mumbai (85 million sq. ft.) and other prominent Asian
business hubs such as Singapore (56 million sq. ft.), Hong
Kong (73 million sq. ft.), Bangkok (13 million sq. ft.) and Kuala
Lumpur (36 million sq. ft.).
In recent times, flight to quality, rental arbitrage and availability
of large scalability options have driven occupier interest
from the central locations of the city to more cost effective
commercial hubs in the suburban/peripheral areas of the city.
Marathahalli - Sarjapur Outer Ring Road (ORR), Whitefield, and
peripheral locations of North Bangalore, have emerged as the
growth vectors for Bangalores commercial real estate market
accounting for a dominant share of the citys commercial real
estate supply and absorption dynamics.
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INTRINSIC STRENGTHS THAT DRIVEBANGALORE AS INDIAS PIVOTALCOMMERCIAL HUB
The Silicon Valley of India is home to both domestic and global technology companies. ~Bengaluru has about 950 IT firms out of an overall count of 2,400 in India1.
Hub of fast growing nano-technology, bio-engineering, aerospace, electronics-related firms inIndia2.
Establishment of the Export Promotion Industrial Park (EPIP) Zone in 1996 and InternationalTechnology Park Ltd. (ITPL) in 1998 at Whitefield3.
Availability of high quality commercial spaces offered by majority of prominent developers,customized to the needs of IT companies4.
Affordable office rents due to constant addition of high quality supply over the years (owing tothe fact that Bangalore is a circular city and has grown in all directions, unlike say Mumbai,which has space constraint or Hyderabad, which has grown only in one pocket)5.
Quality residential developments across the spectrum, with affordable projects from prominentdevelopers across the city6.
Bangalore Metropolitan Region is spread over an area of 8,005 sq. km., includingthe Bengaluru Metropolitan Area that is divided into 5 Area Planning Zones (APZ)and 6 Interstitial Zones (IZ)7.
Multiple infrastructure initiatives under development to enhance connectivity anddrive real estate growth across the city8.
Peripheral Ring Road (PRR) will circumnavigate the city beyond the ORR, connectingall major highways and arterial roads9.
Metro Phase-I is partially operational, expected to become ready by Q4 2016,followed by Phase-II by 202110.
REAL ESTATE AND COMMERCESOCIAL INFRASTRUCTURE ANDHUMAN RESOURCE
PHYSICALPLANNINGAND
INFRASTRUCTURE
Fast Facts
Strengths
Asia's fastest growingcosmopolitan city, marked with
characteristic architectural landmarks,shopping centers and business
opportunities. It was critical in attractingmultiple industries, making it an ideal
gateway to India and beyond15.
Capital of Karnataka, Bangalore is wellconnected with other parts of the state and
country via road, rail and air, along withinternational flight connectivity options across
the globe16.
Bangalore is among the best cities to livein India, it enjoys a more moderate (tropical
savanna) climate throughout the year17.
The Karnataka State Electronic DepartmentCorporation Limited (KEONICS) to promote
electronics industries. Phase 1 of the Electronic CityIndustrial Park has been set-up18.
Favorable market for Foreign Direct Investors.Bangalore ranked 4th by contributing nearly 6% to
cumulative FDI inflows in the country between April2000 and January 201519.
Huge pool of skilled and technology savvy workforcewith the presence of top educational institutions such asthe Indian Institute of Science, National Institute of Design
(NID), Indian Institute of Management Bangalore (IIM-B)etc20.
In the last two decades, many private sector and multi-nationalcompanies have set up base in Bengalore, utilizing the citys
vast human resource availability. It has a large floating populaceowing to clustering of IT, biotech, aerospace, defense, nano-
technology and electronics industries and large public sectorenterprises that have attracted the best talent from across thecountry21.
Utility infrastructure such as power, water and telecommunicationis good and adequate with challenges in select peripheral micro-markets22.
Well-developed social infrastructure with a good network ofshopping centers (30 operational malls), entertainment theaters,
F&B outlets, schools, hospitals, etc11.
Select tertiary and quaternary healthcare establishments such asNarayana Hrudayalaya, HCG Cancer Care, Manipal Hospital,Colombia Asia Hospital, Apollo Hospital are fueling growth of
medical tourism. Bangalore attracted approximately 25% ofthe total Foreign Tourist Arrivals (FTA) for medical treatment, atapproximately 10% FTA from January 2009 to January 201512.
Hospitality sector has improved significantly in the last coupleof years. FY 201314 saw the addition of 1,350 branded
rooms with an increase in occupancy over the previous year.The future hospitality supply for Bangalore is estimated to grow
by approximately 7,000 hotel rooms over the next five years, ofwhich 66% is being actively developed 13.
The IT/ITeS and IT hardware sectors accounted for 67%share of the total new employment opportunities generated inBangalore during FY 20131414.
Source:15.CBREandsecondayresearch | 16.CBREResearch,SecondaryResearch | 17.Source:SecondaryResearch18.KarnatakaStateElectronicsDevelopmentCorporationLimited | 19.DepartmentofIndustrialPolicyandPromotion,IndiaFDIJanuary201520.SecondaryResearch | 21.KarnatakaIndustrialAreaDevelopmentBoard,http://www.kiadb.in | 22.KarnatakaIndustrialAreaDevelopmentBoard,http://www.kiadb.in
Source:1.NASSCOM,RegionalNewsLetter-South-June2012 | 2.CBREResearch | 3.Secondaryresearch | 4.CBREand secondaryresearch5.CBREandsecondaryresearch | 6.Secondaryresearch | 7.CBREResearch | 8.CBREResearch,secondaryresearch | 9.CBREResearch,secondaryresearch10.CBRE Research,secondaryresearch | 11.http:// www.dnaindia.com/bangalore/report-bangalore-a-mall-too-many-1880092,https://en.wikipedia.org/wiki/List_of_schools_in_Bangalore| 12.IndianJournalofresearch,Paripex MredicalTourisminIndia.Jan2014 | 13.FederationofHotel&RestaurantAssociationsofIndia (FHRAI),IndianHotel IndustrySurvey 2013-2014| 14.ASSOCHAM JobTrends AcrossCities& Sectorssurvey,2013-14 FY- http://www.daijiworld.com/news/news_disp.asp?n_id=195135
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Out
er
RingRo
ad (O
RR)
Oute
rR
ing
Road(O
RR)
Oute
r
RingRoad(ORR)
Operational Metro Line Proposed Metro Line Under construction Metr o Line
Airport Elevated Expressway
LEGEND:
Per iphe ra l R in g R oad ( PR R) N IC E c or ri do r
14
15
18
16
17
11
11
11
12
5
6
19
13
13
9
7
8
4
2
10
10
31
REBOOTINGINFRASTRUCTURETO SUPPORT THEDEVELOPMENTCURVE
Metro Reach I - Purple Line (East)1
Metro Reach II - Purple Line (West)3
Metro Reach III - Green Line (North)5
Metro Reach IV - Green Line Under construction (South)7
Metro Phase - Under construction9
NICE Corridor11
Proposed Peripheral Ring Road (PRR)13
Purple Line Extension - East (Proposed)12
Purple Line Extension - West (Proposed)24
Green Line Extension - North (Proposed)36
Green Line Extension - South (Proposed)48
Phase II - Red Line - Metro Link (Proposed)510
Elevated Airport Expressway12
Bangalore Bio-innovation Centre (BBC)14
Bio-tech park in south Bangalore15
Devanahalli Business Park16
BIAL - Aerotropolis17
Aerospace SEZ18
Phase II - Yellow Line - Metro Link (Planning) 619
1.Extensionto EastLine(Baiyappanahallito Whitefield)| 2.Extensionto WestLine(MysoreRoadtoKengeri)| 3.Extensionto NorthLine(NagasandratoBIEC)|4. ExtensiontoSouthLine(PuttenahallitoNICEJunction)|5. RedLine(NagawaratoGottigere)|6. YellowLine(RVRoadinterchangetoBommasandra)
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The Bangalore Metro Rail project is aimed at connecting important hubs in the city through 32 stationsand two lines, with an estimated travel time of 33 minutes between terminal stations across the city.Both phase I and II combined is expected to cover up all the major areas of the city to provide the muchrequired last mile connectivity.
Operational stretch:
Reach I Swami Vivekananda station, Trinity Circle, Ulsoor, Byappanahalli (operational sinceOctober 2011).
Reach III Malleshwaram, Rajajinagar, Yeshwanthpur, Peenya (operational since March 2014).
Reach II Magadi Road, Vijayanagar, Mysore Road Terminal (operational since November 2015).
Under construction stretch:
Reach IV Jayanagar, R V Road Terminal, Puttenahalli (expected completion by Q4 2016.
Focus and impact on growth corridors:Areas including CMH Road (Indira Nagar), MGRoad, Malleshwaram, Ulsoor, Domlur, Byappanahalli, and others have witnessed residential capitalappreciation in the range of approximately 2030% since 2011. Going forward, the planneddevelopment is expected to develop real estate and push up property prices across Yelahanka,Hesarghatta, Puttenahalli, Jayanagar, Electronics City, BTM Layout and Nagavara.
The NICE Corridor, implemented by Nandi Infrastructure Corridor Enterprises Limited, is a 4-6 lanehighway. Part of the prestigious Bangalore Mysore Infrastructure Corridor (BMIC) project. Conceptualizedby the Karnataka Government in the 1990s t o provide seamless connectivity between Bangaloreand Mysore, the corridor comprises of 42 km Peripheral Road running across South West Bangaloreincluding Hosur Road, Banerghatta Road, Kanakpura Road and Tumkur Road, besides 9 km Link Roadconnecting Outer Ring Road and Peripheral Road, with 12 km of the expressway extending beyond theLink Road Peripheral Road intersection.
Focus and impact on growth corridors:The corridor is complete and has enhanced connectivitybetween different nodes of the city. This stretch is expected to connect Bangalore City with Mysore
through an additional 111 km extended road. To enhance connectivity NICE Ltd. has also undertakendevelopment of seven interchanges on the Peripheral Road as part of the corridor project.
The elevated expressway (operational from December 2013) from Hebbal to Kempegowda InternationalAirport on NH-7 remains an asset for the citys commuters.
Focus and impact on growth corridors:Completion of the expressway has helped in easingtraffic congestion and reducing commuting time from Hebbal to the International Airport to just 20minutes. The region has recorded ample commercial activity in locations such as Jakkur, Amrutahalli,Sahakara Nagar and Devanahalli on the Bellary Road (North) in the last two years.
The proposed 63.4 km expressway will connect Tumkur Road (North West) to Hosur Road (South) viaBellary Road (North) and Old Madras Road (East). The 100 meter wide road with a 6-lane bi-directionalcarriageway would integrate many national and state highways along its entire stretch in Bangalore. TheBangalore Development Authority (BDA) has already finalized the Detailed Project Report (DPR) for theproject and construction is expected to begin shortly. Land acquisition for the road is currently underway.
Focus and impact on growth corridors: The PRR will be classified as an urban road and willhave high demand with increasing urbanization. As per Government planning, the PRR would ease offtraffic congestion and boost commercial activity along Tumkur Road, Bellary Road, Old Madras Road,Sarjapur Road and Hosur Road.
Bio-tech Park in South Bangalore: Spread across 53 acres in Electronic City, the biotech park,Alexandria Knowledge Park, also called Helix, is expected to be an integrated project with laboratory,technology and commercial spaces. The project proposes to offer infrastructure in line with globalstandards and attract multi-nationals to set up their base in Bangalore.
Bangalore Bio-innovation Centre (BBC): The Centre is currently operational and offers worldclass incubation spaces along with a central instrumentation facility over a 10 acre campus with a totalbuilt-up area of 60,000 sq. ft. The project is supported by the Department of Biotechnology (DBT),Government of India. The center is expected to support, boost and attract new start-ups.
BIAL (Aerotropolis):The Aerotropolis is expected to consist of various real estate components suchas commercial, hospitality, retail, healthcare, education, as well as conference and exhibition centers.The project is spread over 4,000 acres, which would consist of 462 acres dedicated to real estatedevelopment.
Hardware Park:Admeasuring approximately 850 acres, it is expected to be developed as anexclusive park for hardware companies, with specific areas allotted for Taiwanese companies. In total,three companies are operational with the allotment of 47 corporates. (Prominent allottees include ShellTechnologies, Degremont, IFCI Financial City, etc.).
Aerospace Park:Admeasuring approximately 980 acres, it includes an Aerospace SEZ and isexpected to be developed as an aerospace hub. The p ark has witnessed 52 allotments so far, wherein
17-18 companies have taken possession. Of these, five companies have commenced activity inside thepark. (Prominent allottees include Starrag Heckert, Wipro Actuators, Amada, etc.).
IT/ BT Parks:Admeasuring approximately 1,160 acres, these have witnessed negligible activity with142 allottees so far. (Prominent allottees include Infosys, TATA Consulting Engineers, Reliance InfoComm, etc.).
Devanahalli Business Park:This project will provide another 309 acres of infrastructurefor hospitals, retail and hospitality development adjacent to northern boundary of the BangaloreInternational Airport Limited (BIAL). It will be a multi-use business park with two IT parks of 50 acreseach, a central business district on 35 acres, three hospitals on 26 acres, retail and hospitality on 22acres, a finance district on 25 acres, and a goods assembly unit on 25 acres.
Focus and impact on growth corridors:Development of all such parks and innovation centers isexpected to boost basic infrastructure, generate employment and improve commercial/residential realestate activity in and around these growth hubs in the North, East and South of the city. Moreover, themain aim of government and semi- government agencies is to acquire land and form industrial areas inthe state, provide basic infrastructure in each industrial area, expand and promote development of singleunit complexes. Many of these proposed parks are currently in various stages of development and areexpected to be fully operational in the next 1015 years.
NAMMA METRO PERIPHERAL RING ROAD (PRR)
INDUSTRIAL PARKS AND INNOVATIONCENTERS
NICE / BMIC CORRIDOR
AIRPORT ELEVATED EXPRESSWAY
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LARGEST OFFICE HUB IN INDIA
Over the past two decades, Bangalore has emerged as the nerve center of Indias information
technology industry characterized by the presence of a large number of prominent IT/ITeS companies,
Research and Development (R&D) centers, and prominent educational institutions. Sustained demand for
IT/ITeS office space has spurred growth of commercial real estate in the city, with a significant expansionin transaction velocity across most micro-markets in the past few years.
In recent times, Bangalore has not only outperformed its regional counterparts, Delhi and Mumbai, in
terms of quantum of space transacted but also in terms of expansion of organized investment-grade
office stock. Sustained demand for office space has consistently driven commercial real estate growth in
the city that crossed a milestone in mid-2013by becoming the first Indian office hub to join the global
club for 100-million-sq. ft. office markets. Furthermore, the year 2015 recorded the highest quantum
of new supply infusion at nearly 12.7 million sq. ft., mainly concentrated in the three micro-markets of
ORR, North Bangalore and Whitefield. The citys overall commercial office stock stands at ap proximately
127 million sq. ft.; compared to other prominent commercial hubs such as Delhi NCR (95 million sq. ft.)
and Mumbai (87 million sq. ft.).
BANGALOREOFFICE MARKET-KEY HIGHLIGHTS
EXPANDING TOWARDS THE PERIPHERY
Availability of high quality office space at affordable rentals, presence
of skilled manpower along with good connectivity and improved
infrastructure are some of the reasons that have spurred demand
for office space from corporate occupiers. While demand for office
space in the Central Business District (CBD) has been historically
high due to its locational and connectivity advantages, recent times
have witnessed a flight to quality by tenants to more cost effective
commercial hubs in the suburban/peripheral areas of the city. The
MarathahalliSarjapur Outer Ring Road (ORR), Whitefield, and
peripheral locations of North Bangalore, in recent times, have
emerged as the growth vectors for the citys commercial real
estate market, accounting for a dominant share of corporate
real estate supply and absorption dynamics. The Marathahalli
Sarjapur ORR and Whitefield, in particular, have emerged as
preferred options for corporate also compete with each otheron the basis of rents quoted. Whitefield commands one of
the lowest commercial rentals across the city at INR 3040
per sq. ft. per month owing to its significant distance from
the city center, and ample availability of supply keeping
rentals in check23. In comparison, the ORR has witnessed
strong transaction velocity in the past couple of years,
amid improved infrastructure and a growing occupier
preference for built-to-suit developments. Consequently,
the average rents in this micro-market are almost
double that of Whitefield.
2011 2012 2013 2014 2015
Source: CBRE Research, Q4 2015.
GradeAS
tock(InMnsqft)
67
88
96
77
70
80
103
79
86
114
95
127
8783
62
CHART 1: YEAR WISE COMPARATIVE OF STOCK IN TOP TIER-I CITIES
D el hi M um ba i B an ga lo re
2015 2016 2017(E) 2018(E)
Source: CBRE Research, Q4 2015.
Inmnsqft
12.7
12.8
9.8
3.9
CHART 2: BANGALORE EXISTING AND PIPELINE OFFICE SUPPLY
Exist ing Pipline
Source:23.Inthe1990sandearly2000s,theGovernmentallocatedalargequantumofindustriallandtodevelopersfordevelopingcommercialofficespace.Thelandwasallocatedtodevelopers(cleart it lelandateconomicalrates)withthecondit iontodeveloptheareaina certaint imeperiodafterlandallocation.ThisledtoconstantandcontinuousadditionofsupplyinWhitefieldoverthelast78years,evenwhendemandwaslower.ThustheWhitefieldmicro-markethasnotedcontinuousaddit ionofsupplywithvacancylevelsintherangeof4-7millionsq.ft .,keepingrentalsincheck.
Today, Bangalore leads other Indian office hubs in transaction activity and supply infusion,
accounting for a share of 33% of the entire development completion pipeline and
approximately 32% of total transaction activity in the leading cities during the first three
quarters of 2015. Moving ahead, Bangalore will continue to lead project completions with
a share of approximately 27% (~23 million sq. ft.) of the total supply pipeline lined up
in the leading cities till the end of 2017. Most of this pipeline will be concentrated in the
peripheral, decentralized hubs of the city, with the ORR constituting a share of approx.
31%, North Bangalore at 23% followed by PBD - Whitefield/Electronic City/others
at 21%.
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RENTAL ARBITRAGE
REMAINS A KEY POINT OF
INTEREST FOR CORPORATE
OCCUPIERS
Despite being a leader in transaction quantum
and office development activity, Bangalore also
offers a significant rental arbitrage as compared
to other leading office hubslargely as a
consequence of relatively lower land values and
subdued capital appreciation of land / assets
across various micro-markets in the city. Over
the years, moreover, ample commercial supply
availability in the city has kept commercial rents
under check across most micro-markets.
Consequently, average rental values in the city
CBD hover in the range of INR 105115 per sq.
ft. per month, less than half the rentals in the city
centers of Delhi (Connaught Place, INR 290300
per sq. ft. per month) and Mumbai (Nariman
Point, INR 210220 per sq. ft. per month).
Similarly in the peripheral micro-markets, the
rental values are far lower at INR 3040 per
sq. ft. per month in Whitefield, compared to
the peripheral locations of the other two cities,
with a rent of INR 4550 per sq. ft. per month
at Navi Mumbai/Thane and INR 8595 per sq.
ft. per month at Gurgaon (NCR). Even when a
relative comparison is drawn between the ORR
in Bangalore and DLF Cybercity in Gurgaon
(NCR)the two leading IT office hubs in the
country accounting for more than 5 million sq.
ft. of space take-up individually on an annual
basisone can clearly see a rental ratio of 1:2.
Rents in DLF Cybercity are in a range of INR
110120 per sq. ft. per month, while those in the
ORR are in a range of INR 6065 per sq. ft. per
month.
This rental arbitrage is one of the key drivers of
occupier focus towards Bangalore; and despite
a sustained rental revision in most micro-markets
across the city in recent quarters; it is likely to
remain a strategic advantage for the citys office
market at least in the short to medium term.
CHART 3: CITY-WISE COMPARISON
As per an office occupier survey conducted by CBRE India in mid-2015, Bangalore scored the highest
among Indian cities, in terms of occupier's expansion strategies over the next two years:
Bangalore scores highest among top 7 tier-I cities in India
Source: CBRE Research, Q4 2015.
Grade AOffice Stock
Cost ofLiving
IT/ ITeSPresence
TalentPool
SocialInfrastructure
PhysicalInfrastructure
Bangalore
City
Chennai
Hyderabad
Pune
Mumbai
Delhi NCR
Kolkata
0% 5% 10% 15%
% Share
20% 25% 30%
Bangaluru
Mumbai
Gurgaon
Chennai
Hyderabad
Delhi
Pune
Noida
Kolkata
Ahmedabad
Source: CBRE Research, Q4 2015.
CHART 4: OCCUPIERS PREFERENCE - EXPANSION STRATEGIES
Note: Location Preference of Corporates looking for expansion a mong Tier I cities in India, over the n ext two years
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NBD : North BangaloreCBD : Central Business DistrictEBD : Extended Business DistrictSBD : South Bangalore DistrictORR : Outer Ring RoadPDB: Peripheral Business District
NH4-Pune
Tumkur Road
Magadi Road
Mysore Road
NICE Ring Road
Peripheral Ring Road (PRR)
Peripheral Ring RoadOUTER RING ROAD
NH-7-Hosur Road
ELECTRONICS CITY
Sarjapur Road
NH4-Chennai
HEBBAL
NH-7-HyderabadBellary Road
DoddaballapuRoad
NBDProminent Locations:Banaswadi, Hebbal,Mekhri Circle, Yeshwantpur, Bellary Road etc.
Office Stock:Approx. 14.8 mn sq. ft. (Grade A)
Supply pipeline:Approx. 5 mn. sq. ft. till endof 2017
Average Rentals:Approx. INR 5060/sq.ft/month. Average rental growth ofapprox.23% during 2010-2014
Top Sectors:Technology, Engineering/Manufacturing, Telecommunications
CBDProminent Locations:MG Road, Lavelle Road,VM Road, Cunningham Road etc.
Office Stock:Approx. 8.85 mn. sq. ft. (Grade A)
Supply pipeline: Approx. 1 mn. sq. ft. till endof 2017
Average Rentals: Approx. INR 90 110/sq.ft/month. Average rental growth of app rox. 28%during 2010-2014
Top Sectors: Engineering/Manufacturing,Technology, Media, Banking/Financial Services
EBDProminent Locations:Airport Road, CV RamanNagar, Inner Ring Road, Old Madras Road, Ulsoor,Koramangala etc.
Office Stock: Approx. 18.9 mn. sq. ft. (Grade A)
Supply pipeline: Approx. 3.7 mn. sq. ft. till endof 2017
Average Rentals:Approx. INR 80 100/sq.ft/month. Average rental growth of approx. 27%during 2010-2014.
Top Sectors:Technology, Banking/FinancialServices, Engineering/Manufacturing
SBDProminent Locations:Bannerghatta Road, HosurRoad, JP Nagar, Mysore Road etc.
Office Stock:Approx 15.8 mn. sq. ft. (Grade A)
Supply pipeline: Approx. 1.2 mn. sq. ft. till end of2017
Average Rentals:Approx. INR 4555/sq.ft/month. Average rental growth ofapprox.22% during 2010-2014
Top Sectors:Technology, E-commerce
ORRProminent Locations:Marathahalli ORR,Sarjapur ORR
Office Stock: Approx. 35.2 mn. sq. ft. (Grade A)
Supply pipeline:Approx. 7.5 mn. sq. ft. till endof 2017, including IT-Non SEZ and SEZ
Average Rentals:Approx. INR 6068/sq.ft/month. Average rental growth ofapprox.31% during 2010-2014
Top Sectors: Technology, E-commerce,Banking/Financial Services,Engineering/Manufacturing,Pharmaceuticals/Healthcare/Biotechnology
PDBProminent Locations:Whitefield, Electronic City,Sarjapur Road etc.
Office Stock:Approx. 33.8 mn. sq. ft. (Grade A)
Supply pipeline:Approx. 5 mn. sq. ft. till endof 2017
Average Rentals:Approx. INR 3337/sq.ft/month. Average rental growth ofapprox.31% during 2010-2014
Top Sectors: Technology,Engineering/Manufacturing, Banking/FinancialServices
BANGALORES LEADING OFFICE NODES
1
1 2 3 4 5 6
23
4
5
6
Proposed Metro Line
Operational Metro Line
Under construction Metro Line
Under construction Road
Operational Roads
Airport ElevatedExpressway
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MARKET DYNAMICS
What Works?Centralized location; excellent connectivity; superior image and profile; proximity toretail and residential hubs; well-developed physical and social infrastructure.
What Doesnt?Limited availability of Grade A space, restricting scope for expansion or large-sizedleasing; lack of developable land parcels; relatively higher asset pricing expectations by developers forselect developments.
Where is the Focus?Small sized transactions in second generation spaces or select Grade Adevelopments; a sizable part of the overall vacancy is attributable to older Grade B developments.
Recent Trends:Mostly small-sized space take-up by technology and banking firms; select occupierslooking at second generation spaces vacated by prominent technology firms relocating to peripherallocations, as well as vacant Grade B spaces; rental appreciation in relatively newer office developments,despite tapered growth in recent quarters; instances of ground and mezzanine floors being leased outfor retail outlets.
Top Sectors:Engineering/Manufacturing, Technology, Media, Banking/Financial Services
MARKET DYNAMICS
What Works?Proximity to the city center; quality infrastructure; relatively higher availability of GradeA space with larger floor plates; proximity to residential catchments and social infrastructure; presence ofselect large-sized tech parks and small to medium sized commercial developments.
What Doesnt?Relatively higher asset pricing vis--vis peripheral locations; limited options forfurther expansions.
Where is the Focus?Small to medium sized transactions in mostly second generation spaces vacatedpreviously by prominent technology firms relocating to the Outer Ring Road (ORR).
Recent Trends:As vacancy levels deplete in the ORR, select occupiers have returned to this micro-market, aiding transaction activity. Rental values across prominent developments are on an upwardtrajectory, appreciating by 6-7% q- o-q and by nearly 21-22% y-o-y in Q3 2015. An infusion ofapproximately 1.6 million sq. ft. of IT space by the end of 2016 is likely to generate significant occupierinterest and trigger transaction activity. On the back of strong occupier demand, rental values are likelyto appreciate further in the short to medium term.
Top Sectors: Technology, Banking/Financial Services, Engineering/Manufacturing
CENTRAL BUSINESS DISTRICT (CBD) EXTENDED BUSINESS DISTRICT (EBD)
CHART 5: SUPPLY, ABSORPTION & VACANCY%:
CHART 6: RENTAL TREND
2011 2012 2013 2014 2015
95 95
108
90
85
0%
2%
4%
6%
10%
8%
0
0.2
0.4
0.6
2011 2012 2013 2014 2015
Inmnsq.
ft.
INR/sqft/month
Source: CBRE Research, Q4 2015.
Source: CBRE Research, Q4 2015.
Supply Absorpt ion Vacancy %
2011 2012 2013 2014 2015
INR/sqft/month
75
70
85
70 70
0%
1%
2%
3%
4%
5%
6%
0
1
2
3
2011 2012 2013 2014 2015
Source: CBRE Research, Q4 2015. Supply Absorpt ion Vacancy %
CHART 7: SUPPLY, ABSORPTION & VACANCY%:
CHART 8: RENTAL TREND
Source: CBRE Research, Q4 2015.
Inmnsq.
ft.
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MARKET DYNAMICS
What Works?Proximity to prominent residential catchments in the South, ample social infrastructure;typically commands lower office rents in comparison to the more established and centrally locatedmicro-markets in the city.
What Doesnt?Limited space options for occupiers and absence of quality supply addition innear future; narrow roads leading to high traffic congestion; construction of MRTS adding to trafficcongestion.
Recent Trends:Transaction activity remained dormant in recent times; select leasing from technologyfirms for small to medium sized back-office requirements; while select occupiers are evaluatingrelocation to peripheral areas due to rental differential and congestion caused by ongoing metroconstruction. Rental growth remained muted in recent times, weakest among all micro-markets.
Top Sectors:Technology, E-commerce
SOUTH BANGALORE (SBD)
2011 2012 2013 2014 2015
INR/sqft/month
44
45
46
45 45
0%
2%
4%
6%
8%
0
0.2
0.4
0.6
1.0
0.8
2011 2012 2013 2014 2015
Source: CBRE Research, Q4 2015.
CHART 9: SUPPLY, ABSORPTION & VACANCY%:
Source: CBRE Research, Q4 2015. Supply Absorpt ion Vacancy %
CHART 10: RENTAL TREND
Inmnsq.
ft.
MARKET DYNAMICS
What Works?vailability of quality office space with large-sized floor plates; proximity to the CBD andmajor residential catchments; access to a large talent pool; availability of contiguous developable landparcels providing scalability options to corporates; improved connectivity to the airport; infrastructure up-gradation to turn the ORR into signal-free corridor; large-scale completed SEZ supply integrated parktype environment with amenities such as food courts, crches, hotels, etc; relatively competitive assetpricing vis--vis central and secondary locations of the city.
What Doesnt?Limited space available in completed developments in the last 1-1.5 years, especiallyfor sizes higher than 100,000 sq. ft.; a s developers increasingly focus on build-to-suit (BTS) projects, anartificial rental growth remains maintained (due to limited addition of speculative spaces), which mightdisrupt the rental arbitrage offered by this micro-market vis--vis other prime locations such as the CBDand EBD; increasing traffic woes on a ccount of large employee population in all these parks.
Where is the Focus?Medium to large sized transactions for consolidation-cum-expansion initiativesin tech parks, SEZ developments; active pre-commitment of under-construction space, especially newphases of existing well leased office projects; BTS remains a preferred option as well.
Recent Trends:ORR continues to dominate commercial office leasing in the city, accounting for amajor share (more than 50%) of the leasing activity in the past four quarters. It offers scope for furtherexpansion/ consolidation and a number of corporate firms have chosen BTS space options apart fromupcoming under construction projects.
Top Sectors:Technology, E-commerce, Banking/Financial Services, Engineering/Manufacturing,Pharmaceuticals/Healthcare/Biotechnology
OUTER RING ROAD (ORR)
2011 2012 2013 2014 2015
INR/sqft/month
48
55
64
48 50
0%
5%
10%
15%
20%
0
2
4
6
8
2011 2012 2013 2014 2015
Source: CBRE Research, Q4 2015.
Source: CBRE Research, Q4 2015. Supply Absorpt ion Vacancy %
CHART 11: SUPPLY, ABSORPTION & VACANCY%:
CHART 12: RENTAL TREND
Inmnsq.
ft.
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MARKET DYNAMICS
What Works?A new location offering a sizable supply pipeline (although mostly planned) along withadvantages such as proximity to the international airport, good connectivity with the city center and asuperior infrastructure base. On account of presence of Airport in the Northern periphery, governmenthas undertaken various infradtructure initiatives to improve connectivity of the location by d evelopingwide roads, signal free corridors, etc. Currently, numerous mid-sized commercial offices projects areunder construction/under planning stage in Hebbal and Yelahanka. SEZ developments on Hennur Roadand Bellary Road are likely to propel the growth of this suburb as a key office market.
What Doesnt?As the micro-market is a newer growth vector, majority of the existing employeecatchments are located in South / East/ South-east Bangalore, thus there is significant resistance fromemployees to travel to NBD for work. This has led to corporates deferring their decision to move toNorth Bangalore. The Area also Lacks completed residential supply; social infrastructure in terms ofretail, recreational options, limited healthcare options and intermittent power supply and limited wateravailability;
Where is the Focus?Medium to large format spaces in recently completed or under-constructionprojects nearing completion.Recent Trends:Office space take-up rose significantly during the third quarter, largely led by the ITsector. This area also saw pre-commitments in select under-construction properties nearing completion.
Areas such as Bellary Road, Hebbal and Nagavara, noted most project completions during the reviewperiod. Offers significant potential for demand generation due to the sizable supply lined up in2-3 years.Top Sectors: Technology, Engineering/Manufacturing, Telecommunications
NORTH BANGALORE (NBD)
CHART 15: SUPPLY, ABSORPTION & VACANCY%
2011 2012 2013 2014 2015
INR/sqft/month
5455
58
53
48
0%
5%
10%
15%
20%
25%
0
1
2
3
4
2011 2012 2013 2014 2015
Source: CBRE Research, Q4 2015. Supply Absorpt ion Vacancy %
CHART 16: RENTAL TREND
Source: CBRE Research, Q4 2015.
Inmnsq.
ft.
MARKET DYNAMICS
What Works? Relatively lower rentals, quality developments with larger formats as well as thepresence of newer residential catchments and developing social infrastructure. Rental values in theperipheral business districts of Whitefield and Electronic City are typically lower than other Bangaloremicro-markets and other leading cities such as Delhi and Mumbai. The two micro-markets are attractivefor firms seeking large spaces at comparatively lower rentals, since they offer tenants significant scopefor expansion due to availability of sufficient scalability options.
What Doesnt?Distance from the city center, poor connectivity and significant (physical) infrastructureissues have pushed demand towards the ORR and North Bangalore; on-going metro work and otherinfrastructure projects might add to the already existing traffic congestion. Electronic City specificallysuffers from lack of quality residential catchment, social infrastructure as well as distance from theinternational airport; factors that have deterred office occupiers from entering this region in recent times,leading to rental stagnation.
Where is the Focus?Medium and larger-sized spaces, primarily driven by consolidation andexpansion requirements of prominent technology firms; pre-commitment in few under-constructiondevelopments.Recent Trends:Has been witnessing steady demand, however, continuous supply infusion over thepast few quarters has resulted in higher vacancy levels, currently estimated at approximately 30%. Theregion witnessed strong occupier demand during the year.Top Sectors: Technology, Engineering/Manufacturing, Banking/Financial Services
PERIPHERAL BUSINESS DISTRICT (PBD)
CHART 13: SUPPLY, ABSORPTION & VACANCY%
2011 2012 2013 2014 2015
INR/sqft/month
30
32
36
30 30
0%
10%
20%
30%
50%
40%
0
1
2
3
4
2011 2012 2013 2014 2015
Source: CBRE Research, Q4 2015. Supply Absorpt ion Vacancy %
CHART 14: RENTAL TREND
Source: CBRE Research, Q4 2015.
Inmnsq.
ft.
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The matrix below compares the prominent office micro-markets in the city along real estate indicators
such as availability of quality space, pipeline strength, pricing, infrastructure strength and connectivity,
among others.
It is clear from the analysis below that the central locations of the city, namely the CBD, EBD and South
Bangalore, outclass the city s peripheral locations in terms of infrastructure availability. However, despite
this perceptible advantage, the Outer Ring Road stretch has clearly emerged as a preferred destination
for prominent corporate occupiers to enter and expand their footprint in the city, largely accentuated by
the availability of high quality office space, upcoming infrastructure, better connectivity and the sizablesupply pipeline for the next 23 years. The ORR is followed by the peripheral districts of Whitefield /
Electronic City and North Bangalore in terms of their ability to offer large sized spaces for facilitating
expansion / consolidation activities of corporate firms. Currently the ORR also offers the highest
concentration of SEZ stock across all micro-markets in the city.
COMPARINGCORPORATE HUBS
EMERGING TRENDSIN BANGALORESOFFICE LEASINGMARKETSINCREASED FOCUS ON BTS DEVELOPMENTS
To reduce speculative risks associated with developing multi-tenanted buildings, developers are
increasingly focusing on developing Built-to-Suit (BTS) spaces with pre-determined specifications. Froman occupier perspective, BTS is an attractive proposition. Most corporate firms in Bangalore are seen
committing to large scale floor plate spaces. Consequently, they prefer campus style alternatives where
the design is customized as per their unique space needsprojecting the firms image, maximizing
location choices, improving space efficiency and incorporating latest construction materials and
technology. Moreover, any speculative office space supply entering the market remains limited, providing
greater control over rental values. This is particularly true in the case of Bangalores ORR, where low
vacancy levels and limited multi-tenanted building supply, together with most of the pipeline being BTS,
has already seen pre-commitments from various occupiers. This exercise is also prevalent in some of
the large tech parks in North Bangalore. Of the entire office stock in Bangalore, approximately 30%
comprises BTS developments.
SHIFT FROM PURE CONSOLIDATION TO EXPANSION
STRATEGIES
As organizations respond to the forces of globalization, amid a backdrop of economic uncertainty
and cost optimization, their real estate portfolio strategies and responses to the need of expanding
headcounts and footprint keep varying. Optimum space utilization, efficiency and productivity are some
of the key parameters on the basis of which companies redefine their real estate strategies. In recent
years, to drive down operating costs and improve efficiency, a number of corporates in Bangalore have
been aiming at operating through a single facility rather than multiple locations within a city. There are
significant cost advantages in such a strategy, especially improvement in the operational efficiency of thebusiness. Many corporates who find the real estate costs of their current locations unsustainable over
the long run have been opting to move to new locations that offer similar advantages and facilities at
comparatively lower prices. Select corporate firms have also responded to the pressures of increasing
headcount by simply leasing new office space in secondary and peripheral locations of leading tier I
cities as well as in smaller cities. In recent times, however, there has been a gradual shift in occupier
strategy from pure consolidation of their footprint to a mix of consolidation and expansion, and pure
expansion initiatives. Prominent occupiers from financial services, IT/ITeS, and consulting / research
sectors, among others, have expanded their footprint in mostly suburban / peripheral micro-markets
such as ORR / Whitefield. In a recent research undertaken by CBRE ta rgeting shared services occupiers,
it was noted that out of all the expansion-led transactions closed over the past two years, approximately
half were closed within Bangalore. Moreover, this translated to almost 90% of the entire space take-
up by shared services occupiers in the city during the review period. This clearly signifies that occupier
focus has gradually shifted from consolidating to a larger facility to committing to future expansion plans
across various micro-markets within the city.
However, while measuring potential for future growth, North Bangalore leads other micro-markets,
owing to its proximity to the International Airport, better transportation network and a number of
infrastructure initiatives undertaken by the Government (such as the Information Technology Investment
Region, International Finance Centre, Hardware Park and Aerospace Park). Large scale availability
of developable land parcels offers the micro-market a significant potential for stimulating future
development activity.
Availability of quality space for large scale expansion(presence of ample scalability options for occupiers)
Note: All 5 blocks filled up indicate the highest rating, while one block filled up indicates the lowest rating (rating out of five). All Empty blocks represent non-applicability of the parameter.
Occupier focus (transaction quantum)
Competitiveness in terms of Total Occupancy Cost(average rentals, service charges & tax)
Social infrastructure network *(presence ofeducational institutions, healthcare facilities, hotels,leisure and entertainment facilities)
Strength of supply pipeline
Strength of the catchment
Availability of SEZ options
Competitiveness in terms of residentialcapital values
Proximity to the International Airport
Planned infrastructure investments/potential economicdrivers*(road & bus connectivity, access to current andfuture public transportation modes MRTS, upcominginfrastructure, power and water availability)
Long-term land availability as a propeller ofdevelopment activity
CBDParameter EBD ORR PBDSouth
BangaloreNorth
Bangalore
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GROWING PREFERENCE FOR PURCHASING AGAINST
LEASING
As the commercial office market continues to strengthen, corporate firms (particularly those from
technology sectors, including start-ups) have started to view Bangalore as a long-term office space
destination. Hedging against a sustained appreciation in asset pricing, an increasing number of firms
have been opting to purchase office space as against leasing space. Apart from creating a possible
buffer against rising capital values, companies have also discovered that the practice of purchasing
office space is not only more cost effective in the long run, but also beneficial in building a significant
asset pool. Bangalore, which offers high-quality office space at comparatively lower capital values
(refer to the City Snapshot section of this report), also offers a significant scope for expansion and
consolidation. Consequently, corporate firms such as Adobe, Scandisk, Honeywell and IMS Healthcare,
among others, have purchased space in the prominent office developments of Prestige Tech Park,
Embassy Tech Square, Prestige Tech Platina, and RMZ Ecoworld. Furthermore, since most of these
purchase transactions are for the end-users customized space needs (in either under-construction
or planned projects), yields are relatively lower and hover in a range of 89.5%. For investment
transactions involving institutional investors, however, office yields are in a range of 1010.5%.
EMERGENCE OF NEW SECTORS
Even as technology firms remain the prima facie driver of corporate space transactions in the city,
new sectors have also emerged to propel the citys office market towards a higher growth trajectory.
Corporate firms, especially from emerging sectors such as e-Commerce, mobile-application-based
service providers, consulting, research and analytics, et al., have increasingly displayed their preference
for expanding or setting up operations in the citys office markets.
The e-Commerce sector, in particular, has seen its footprint expand across the city in the past two years
or so. Space take up by e-Commerce firms rose from 2% in 2014 to 15% in 2015, with prominent
e-retailers such as Amazon, Flipkart, Snapdeal, Myntra, Redbus, and Urban Ladder, among others,
occupying (or pre-committing) mid-sized to large-sized office spaces in the prominent office hubs of
ORR and other peripheral markets. Mobile application-based service providers such as Ola Cabs, Uber
and Taxi for Sure, among others, have also been active in recent times. These companies have grown
in scale and operations; and their contribution to the citys overall leasing volume is expected to grow
substantially in the years to come.
WORKPLACE CUSTOMIZATION TO OPTIMIZE EFFICIENCY
To improve operational efficiency and cut costs, companies are increasingly looking to optimize theirspace portfolio. Corporate firms are revamping their existing space portfolio and transitioning towards
a more streamlined seating arrangement. At the same time, city-based developers are offering space
options that are customized to client requirements. This enables companies to improve their operational
efficiency, cut costs and focus on their core areas. For instance, a number of prominent city-based
developers such as RMZ, Prestige, Embassy, and Bagmane have set up large-sized standalone food
courts/cafeterias within their sprawling office parks, enabling companies to cut down on costs of setting
up their own cafeteria. As a growing trend, firms have been showing interest in paying additional rent for
particular projects with added amenities, enabling improvement in cost efficiency.
MOVE TOWARDS NEWER GEOGRAPHIES NORTH
BANGALORE
Bangalore's commercial realty market originated from the central locations of the city, and expanded
into the secondary and peripheral locations in South, South-East and East Bangalore. However, with
the establishment of a prominent tech park, ample availability of developable land, low capital value
of property and proximity to the international airport, Bangalore North has become the focus of
prominent corporates looking for expansion in the city in the medium to long term. The initiation of
a few infrastructure projectssuch as the elevated expressway, the proposed high-speed rail link, the
Metro line, and the planned Peripheral Ring Road (PRR), access to Devanahalli and the international
airportare likely to improve connectivity and further enhance the demand for commercial space in
North Bangalore. In addition, government initiatives such as the Information Technology Investment
Region (ITIR), the International Finance Centre, the Hardware Park and Aerospace Park are likely to add
to the infrastructure rejuvenation of this micro-market in forthcoming years. Furthermore, the operational
Hebbal FlyoverAirport stretch has already contributed greatly to the growth of office demand in the
region.
Additionally, as supply saturates in the ORR and other prime locations of the city, and as the rental
arbitrage enjoyed by Bangalores prime office hubs reduces, occupiers will increasingly turn their focus
to the relatively cost-effective North (further North beyond ORR). The year 2015 already appears to be
a threshold in this micro-markets evolution as a growth centers for the citys commercial market. North
Bangalore's overall share in the city's development completions has grown from merely 13% during
2011-14, to more than 30% in 2015. Moreover, a sizable supply pipeline of ap proximately 55.5
million sq. ft. of SEZ/Non-SEZ space is likely to be infused into the micro-market in the next two years.
North Bangalore has also witnessed frenetic residential activity in recent times with a steady stream of
new projects being launched by most prominent developers (Brigade, RMZ, Godrej, Embassy, Prestige,
Purvankara, Sobha, Bhartiya, Karle, et al.), which has been complemented by a healthy off-take from
investors as well as end-users. Availability of land parcels along the Thanisandra, Hennur Road and
Horamavu belts are likely to facilitate commencement of new projects and help maintain healthy supply
dynamics in the micro-market, while expansion in the IT sector will keep feeding the supply in the short to
medium term. Keeping in mind the steady pace of commercial and residential growth, North Bangalore
appears to offer the trajectory towards which Bangalores urban growth is expected to expand. It is
expected that by 201719, the completion of most infrastructure projects, tech parks and growth in
social infrastructure are likely to significantly shift Bangalores office activity towards this micro-market.
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Occupiers looking for large spaces(for consolidation and other
requirements) should consider keyfactors such as Metro connectivity,availability of power, neighboring
residential catchments, SEZ vs
Non SEZ routes in defining theirreal estate strategies; North
Bangalore, Whitefield and Sarjapur/Marathahalli ORR would still remain
key micro-markets.
A fine balance between real estatecosts and efficient workplace
strategies will have to be drawn.Occupiers need to assess their
occupancy ratio/utilization patternsto see that their spaces are optimally
utilized. At the same time costsneed to be justified- all this withoutimpacting employee efficiency and
productivity.
Owing to the paucity ofsupply across CBD, EBDand ORR micro-markets,occupiers looking at short
term leases could also accessbridge space/swing spaceopportunities to hedge therising commercial rents.
Securing long term partnershipswith occupiers by providing
incubation spaces for their short
term needs, staggered growthopportunities through options,would bring in flexibility into
occupier real estate strategy, thusensuring long term loyalty.
Developers should berealistic of demand
patterns and plan theirconstruction by factoringin both - demand peaks
and lows to avoidvacancy risks.
Developers planning largetech parks should consider
providing both SEZ and NonSEZ solutions for occupiers
looking for expansion/consolidation.
In order to retain occupierinterest developers shouldretain lease hold propertiesand not look at strata sale
opportunities.
Start-ups and small/mid-sizedoccupiers should continue toconsider second generation
space options across EBD andfew off EBD markets keepingin mind better connectivity,availability of talent pool,and saving on operational
expenditure.
RECOMMENDATIONS FOR OCCUPIERSAND DEVELOPERS
DEVELOPERSOCCUPIERS
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Buoyed by improved economic sentiments, steady
occupier interest, an improving infrastructure
base, and its intrinsic strengths as a pioneering
hub for technology, research, development and
shared services platformsBangalore is likely to
maintain its leadership position in the countrys
corporate real estate market in the medium to
long term. It will continue to offer technology
firms and allied sectors a stable business
environment and access to a large, skilled labor
pool. Consequently, while technology sectors and
back-office operations will continue to remain
its principle demand drivers for commercial
office space, increasingly, new sectors such as
manufacturing, e-commerce, online start-up
ventures and biotechnology will also eventually
contribute to building the citys commercial
realty skyline. The role of policy schemessuch
as Digital India, Skill Indiaand the booming
e-Commerce sector may not be stressed enough
in this context. These will also play a positive role
in supporting the long-term expansion of the
citys commercial office sector.
Presently occupiers remain focused on Whitefield
and the ORR stretch between Marathalli and
Sarjapur Road; going forward, an incremental
shift towards newer locations such as North
Bangalore is expected. This is mainly owing to
factors such as attractive lease rentals, improving
social / physical infrastructure and residential
developments in the vicinity of the office clusters.
Henceforth, owing to inordinate delay ininfrastructural developments across the growth
corridors, most developments along the ORR
and PBD would continue to witness corrections
in the projected pipeline supply. This is expected
to keep office occupier demand under pressure
in the short and medium term. However, a
point of caution would be the sizeable office
development pipeline spread across most micro-
markets, particularly North Bangalore, and the
OUTLOOK
associated vacancy risks. Occupiers would be
closely following the timely implementation of
infrastructure works and the completion of office
projects in such micro-markets to expand beyond
the ORR and central locations. For now, the
city must receive a strong infrastructure backing
from the local government to expand its present
development footprint and sustain the growth of
its commercial office sector in the long run.
With very limited space availability in core
locations, transaction activity will continue to
move towards the peripheral micro-markets of
ORR, Whitefield, and more importantly, North
Bangalore. Corporate space occupiers are
expected to be attracted by the prospects of
larger floor plates, cost effective rentals and
upcoming infrastructure in these locations.
Reduced vacancy levels in established micro-
markets are likely to lead to healthy pre-
commitments in under-construction projects
nearing completion. Increasingly, occupier focus
will also shift from pure consolidation to a mix of
consolidation and expansion, and pure expansion
initiativesparticularly from sectors such as
technology, engineering and manufacturing,
and banking/financial services. Large corporate
occupiers are also likely to continue to purchase
office spaces or buildings for self-use. This will be
particularly true of those from the IT/ITeS sectors
as they continue to hold a stronger view of the
market in their long-term business plans, apart
from avoiding risks of capital appreciation inthe long run. These demand drivers, for leased
as well as purchased space, are expected to
contribute to a sustained rental app reciation in
the short to medium term, resulting in Bangalore
maintaining its position as a rental leader among
office markets in India as well as the Asia Pacific
region.
0 | CBRE RESEARCH
BANGALORE THE STAR THAT SHINES THE BRIGHTEST | INDIA
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7/26/2019 India Major Report - Bangalore - Star That Shines the Brightest March 2016
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