IT/ITeS Growth Corridor Series_Whitefield & Electronics City, Bangalore


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IT/ITeS Growth Corridor Series_Whitefield & Electronics City, Bangalore

  1. 1. Bangalore:Whitefield and IT/ITeS GrowthElectronics City Corridor Series December 2010 A Strategic Advisory Group Report
  2. 2. Office Space 2010 & Beyond* 25.6 of million sqft Varathur Lake Junction operational spaces including 3.6 million sqft in SEZ 5.1 sqft under million construction of which 2.2 million sqft in SEZHoodi Circle 10 million sqft Whitefield vacant space and no availability in SEZ 20.6 million sqft planned supply including 17.1 million sqft in SEZ d oa rR su HoK. R. Puram Junction 8.2 million sqft of Electronics City Junction operational space and none under SEZ Electronics City 3.3 sqft million vacant space 3.4 4.3 sqft of million sqft of million under construction planned supply and none under SEZ of which 3.5 million sqft. in SEZ * For Non-Captive spaces only 2
  3. 3. Bangalore: Whitefield and Electronic City IT/ITeS Growth Corridor SeriesExecutive Summary Bangalore’s growth story as Silicon Valley of India is However, this planned space quantum could dropsynonymous with the emergence of Electronics City subject to re-consideration of developers over theand Whitefield as IT hubs in Bangalore. IT space notified SEZ parks, reason being the shift in thedevelopment in Electronics City gathered traction occupier’s preference to ORR and Bangalore North. Insince mid 1990s and Whitefield emerged as an IT hub comparison, Electronics City region also has onein late 1990s. Though contemporary, both these planned IT/ITeS SEZ.micro-markets are well differentiated in develop- Till Q3 2010, Whitefield and Electronics City micro-ment ownership, type of occupiers, development markets registered annual office space absorption ofcharacteristics and social and business infrastructure. 1.7 million sqft and 0.46 million sqft respectively. Over the last one decade, Whitefield has developed In both the micro-markets, 80% of the absorption isas a self sustaining suburban area with development driven by expansion of existing operations or new set-of residential projects, modern format retail malls, ups; only balance 20% supported relocation andhotels and other social infrastructure. In comparison, consolidation of operations.Electronics City still continues to remain an economic During last few quarters, office space rentals havehub. firmed-up for Grade A (Premium) & Grade A buildings Whitefield has almost 3 times of the non-captive IT in both the micro-markets on account of increasedoperational space as compared to Electronics City (25 leasing activity. But, rental levels for Grade B+million sqft versus 8.2 million sqft). However, under buildings are still sensitive due to high vacant stock. Incaptive office space category Electronics City leads Whitefield, rentals for SEZ space are likely towith 14 million sqft to that 7.9 million sqft of strengthen on account of high demand and lowWhitefield. vacancy levels. Since 2007, Whitefield has been consistently Whitefield is dominated by MNCs operating in IT &witnessing high vacancy levels. As of Q3 2010, ITeS sectors. In comparison, Electronics City has 65%vacancy levels for non-captive office space are 10 of the space occupied by Indian origin companies andmillion sqft in Whitefield and 3.3 million sqft in 39% of the companies operating in non-IT /ITeSElectronics City. The high vacancy level is registered sector-Biotechnology, Electronics and Engineeringprimarily in Grade B+ buildings, which are 5 million Services.sqft in Whitefield and 2 million sqft in Electronics City. Overall, growth rates in these micro-markets are Currently, Whitefield has three operational IT/ITeS slowing down on account of rise of alternate micro-non-captive SEZs (3.6 million sqft) whereas, markets (ORR and Bangalore North). Never the less,Electronics City has only captive SEZs. In Whitefield, cost benefits, existing tenancy profile and proximityanother 2.2 million sqft is under construction and to talent pool are still strong enough to support the17.1 million sqft is planned in SEZ category. annual absorption at current levels at least in the short term.3
  4. 4. Bangalore: Whitefield and Electronic CityIT/ITeS Growth Corridor Series Figure 1: IT Hubs of Bangalore - Whitefield and Electronics City Bangalore International Airport NH 7: To Hyderabad Proposed Peripheral Ring Road NH 4: To Chennai Hebbal Yeshwantpur KR Puram C V Raman Nagar Whitefield AECS Layout CBD Indiranagar Brookefield Old Airport Road Marathahalli Varthur Road Koramangala Outer Ring Road Silk Board Jn. HSR Layout BTM Layout Sarjapur SH 17: To Mysore Haralur Bannerghatta Hosur Road Road NICE Ring Road Electronics City NH 209: To Kanakpura NH 7: To Hosur Residential clusters in proximity of Whitefield Micro-markets of Whitefield and Electronics City and Electronics City Key Secondary IT Hubs 4
  5. 5. Bangalore: Whitefield and Electronic City IT/ITeS Growth Corridor SeriesPromotion of Electronics City and Whitefield Karnataka State Electronics DevelopmentEPIP Zone were key initiatives of the State Gov- Corporation Limited (KEONICS)ernment of Karnataka to transform BangaloreCity into a Silicon Valley of India KEONICS was established in 1976 with the main objective of promoting electronics related industriesElectronics City in Karnataka. The Electronics City industrial park (Phase I) was a concept developed and implemented• Electronics City, a 580 acre electronics industrial by KEONICS with support from KIADB.park is located along Bangalore – Hosur Road. Themain objective of the development was promotion of Karnataka Industrial Areas Developmentelectronics and IT/ITeS companies in the region. Board (KIADB)• Electronics City has been developed in 3 phases. KIADB is a wholly owned infrastructure agency ofThe Phase 1 (332 acres), commissioned in 1978, was Government of Karnataka with the primary objectivejointly developed by Government bodies – Karnataka to promote growth and development of industries inIndustrial Area Development Board (KIADB) and the state.Karnataka State Electronics Development Primary functions include acquiring land, formingCorporation Limited (KEONICS). Whereas, Phase 2 industrial areas and providing basic infrastructure.(148 acres) and Phase 3 (100 acres), commissioned in The agency is also responsible for acquiring land for2003, were developed by KIADB. Single Unit Complexes and infrastructure projects.• Post 1997, the entire maintenance and up-keepingof Electronics City was handed over to Electronics City ** Note: International Tech Park Bangalore (ITPB) was established inIndustries Association (ELCIA), a professionally 1998. This iconic business park located on Whitefield main road ismanaged organization formed by the industry spread over a 28 hectare estate. It was a joint venture between the Tata Group, Ascendas Group (Singapore) and KIADB. Currentlymembers of Electronics City. managed by Ascendas, the park provides state of the art facilities to more than 145 companies who provide services including Software• In Phase 1, mainly land parcels were allotted to development, R&D and ITeS related activities.companies operating in electronics and IT/ITeSsectors; in Phase 2 land parcels were also allotted tofew biotechnology companies whereas Phase 3 hasbeen allocated for biotechnology companies only.• Key companies operating in this region includeInfosys, Wipro, HP, HCL, Siemens, TCS and others.Whitefield EPIP Zone• KIADB developed Export Promotion Industrial Park(EPIP) Zone (500 acres) in Whitefield in 1994 topromote export related industries. This initiativecatalyzed economic development in this region.• Existing old industrial area, availability of land,connectivity to city centre and proximity to oldairport were the main reasons to establish the EPIPZone in this part of the city.• Further, development of International TechnologyPark Bangalore** (ITPB), placed Whitefield on aglobal map.• Key Companies operating in this micro-marketinclude GE (John F Welch Technology Center), TCS,Oracle, IGate, SAP Labs, L&T and others.5
  6. 6. Bangalore: Whitefield and Electronic CityIT/ITeS Growth Corridor Series Figure 2: Whitefield & Electronics City - Emergence as IT Growth Hubs Electronics City Commissioning of Wipro, HP, HCL campus 2000 1990 1991 Set-up of STPI unit in KSSIDC complex 1999 Commissioning of IIT Campus 1992 Formation 1978 of ELCIA Commissioning 2003 Commissioning of of Phase I Phase II & III 1994 Infosys moves 1982 First allotment corporate of land to ITI HQ to (60 acres) Electronics and NTTF City (10 acres) from Pune. 1978 1980 1990 2000 2010 Commissioning of IGATE 2004 Global Solutions campus Commissioning of KTPO 2003 Convention Centre Commissioning of Perot 2001 Systems (Dell) campus Commissioning of John F. Welch Technology 2000 Center (GE) Commissioning of ITPB 1998 and SAP Labs campus Whitefield and EPIP Zone 1994 Formation of EPIP Zone Table 1: Whitefield & Electronics City - Fact Sheet Attribute Electronics City Whitefield Distance Chart 18 16 CBD (km) Bangalore International Airport (BIA) 56 45 (km) Land Availability Phase I: Not Available KIADB Allotment: Not Available Availability of land for IT development Phase II: Limited Private: Available Phase III: Limited (For Biotech Industries) Zoning and Regulatory Attributes (As per Revised Master Plan 2015) Main Land-use Industrial (Hi-Tech Zone) Industrial (Hi-Tech Zone) Permissible FSI 2.0 - 3.25 (Industrial - Hi Tech Zone) 2.0 - 3.25 (Industrial - Hi Tech Zone) Whitefield Main Road, Mutation Corridor** Plots facing NH 7 ITPB Main Road, Varthur Main RoadNote: ** Mutation Corridor: As per revised Bangalore Master Plan 2007, plots with frontage equal to or more than 12 m are eligible for conversion of land-use tocommercial and the permissible FSI being in the range of 2.75 to 3.25 (depending on the plot size, frontage and abutting road width). In addition to the frontage,the entry and exit to the plot should be provided along the mutation corridor. 6
  7. 7. Bangalore: Whitefield and Electronic City IT/ITeS Growth Corridor SeriesWhitefield has emerged as a self sustained suburban area whereas, Electronics City is not.• Electronics City is surrounded by green zone(protected land) and industrial area (Bommasandra &Jigani). Therefore, this micro-market has limited landavailability for development of sustainable supportinfrastructure.• In comparison, Whitefield is surrounded byresidential and industrial zone and has potential forfuture development. Further, growth in Whitefield isenhanced due to its connectivity with city throughtwo major roads - Old Madras Road and Old Airport ŸOn the other hand, in Whitefield region, promi-Road whereas Hosur Road forms the primary access nent developers including Prestige, Adarsh, Sobha,to Electronics City. Brigade and others have existing and upcomingŸ Electronics City micro-market has good business residential developments. This micro- market hasinfrastructure with 12 hotels operational in two & well developed social infrastructure including retailabove star category. However, lacks in social malls, entertainment options, schools, etc.infrastructure developments - Grade A residential ŸFurther, public transportation facility in Whitefielddevelopments, retail, entertainment and educational is better than in Electronics City in terms of fre-institutes. quency and connectivity. Table 2: Whitefield & Electronics City- Business & Social Infrastructure Attribute Electronics City Whitefield Keys Hotel (Budget class) Hosur Road Manipal County (Resort) Taj Vivanta (5 star) Renaissance Sarovar Hotel (4 star) Royal Orchid Suites (Business Hotel) Amethyst Central, Amethyst Villas and Ginger Hotel (Modern format budget Existing Hotels Amethyst Apartments (Serviced Hotel) Apartment), Savannah Sarovar Premiere (5 star) Electronics City Lemon Tree (4 star), Zuri (5 star) E-Inn (5 star-Business class), Sai Paryavaran (Serviced Apartments) Crowne Plaza (5 star) Svenska Hotel (5 star), Lords Plaza (4 star), Novotel IBIS Hotel (5 star) Berggruen Hotel (5 star) Hosur Road Bonney Hotels (5 star) Chalukya Hotel (5 star) Confident Olive (5 star) RSJ Constructions (2 star) Upcoming Hotels (Till 2012) Radisson (5 star) (Under-construction/ Starlet Smondo Suites Forum Value Mall (Services Apartments) Planned) The Courtyard - K.Raheja Group (5 star) Electronics City (Serviced Apartments) Perk-Inn (5 star) Synergy Constructions Shangri La Hotel (4 star) Hosur Road Nil Cosmos Mall Big Bazaar Existing Retail Malls Hypercity Electronics City Nil Forum Value Mall Hosur Road Independent Developers Phoenix Market City Upcoming Retail Malls Park Square (Under-construction/ City Neo Mall (Strip Mall) Forum Mall Planned) Electronics City Inorbit Mall-K Raheja Group Perk-Inn (E-city Phase 2) Synergy Constructions7
  8. 8. Bangalore: Whitefield and Electronic CityIT/ITeS Growth Corridor SeriesOn the urban infrastructure front, both micro-markets can learn from their global counterparts.• The urban infrastructure across both the micro-markets including roads, footpaths, walk bridges,signage etc is not in par with infrastructure offered inother global economic hubs.• Electronics City is a close-knit designed park withELCIA managed surveillance services, traffic manage-ment & common amenities. Thus, giving a commoninfrastructure and a sense of belonging to an eco-nomic hub, the same is not true for Whitefield.Travel time between Electronics City andBangalore City has reduced with the commis-sioning of the Electronics City ElevatedExpress Way, NICE Ring Road and widening ofHosur Road in 2009 & 2010; however,approach roads to Whitefield continue to facetraffic congestion at major road junctions.• Whitefield can expect significant improvement intravel time only post 2015, after completion ofplanned Bangalore Metro Rail project Phase 3 andproposed Peripheral Ring Road (PRR) Phase 1.• Bangalore Metro Rail Phase 3 is planned to connectWhitefield and Electronics City. Currently, BMRCL isworking on the detailed project report and alignmentfor the phase 3 would be finalized in short term.• The proposed PRR Phase 1 will connect ElectronicsCity, Whitefield, Old Madras Road and Bellary Road(Bangalore International Airport). Currently, BDA isworking on the road alignment and land acquisition. 8
  9. 9. Bangalore: Whitefield and Electronic City IT/ITeS Growth Corridor SeriesOver the last decade, Whitefield and Electronics City office space micro-markets extended beyondEPIP Zone and KEONICS & KIADB designated Electronics City . • Whitefield micro-market includes EPIP Zone and areas enclosed between KR Puram Junction along Outer Ring Road (ORR) to Hope-farm Junction via Hoodi Cirlce; Hope-farm Junction to Varthur Lake• Electronics City micro-market includes 3 phases of Junction covering the Whitefield Road; Varthur LakeElectronics City and the stretch of Hosur Road from Junction to Marathahalli Junction via KundanahalliSilk Board Junction to Hebbagodi. For the study Junction and Kundanahalli Junction to Hoodi Circlepurpose, Patel Realty’s integrated township project covering ITPB Main Road. Also, for this study Beary’sNeo Town and HCL Technologies Campus in Jigani Global Research Triangle in Hoskote has beenare included in this mirco-market. included.9
  10. 10. Bangalore: Whitefield and Electronic CityIT/ITeS Growth Corridor Series Figure 3: Whitefield –IT Growth Hub To Hoskote KR Puram Junction NTo Old Madras Road 1 2 Kadugodi 48 B Narayanapura 4 Industrial Area Garudachar palya 5 Hoodi Circle 6 Kaugodi Colony Mahadevapura 3 7 8 Mahadevapura Industrial Estate 10 Hoodi 939 42 40 43 43 12 38 41 Hope Farm Jn. 13 11 37 IFB Automative 14 44 15 16 17 Ambedkar 21 20 18 Nagar Graphite India 19 36 30 31 22 29 35 23 26 27 28 34 24 25 Dodsworth Layout 33 32 Brookefield Hindustan Unilever AECS Layout Limited 45 Forum Value To M. G. Road Mall Hyper City 46 47 Marathahalli Jn. Varthur Lake Jn. Kundanahalli Jn. To Varthur Non - captive Spaces Captive Spaces Operational SEZ spaces Operational Non-SEZ spaces Existing Malls / Hyper-markets Operational Non-SEZ spaces Upcoming Malls Under-construction Non-SEZ spaces Existing Hotels/ Serviced Apartments Planned SEZ spaces Upcoming Hotels/ Serviced Apartments Planned Non-SEZ spaces Residential Locations KTPO Convention Centre 1 HP Campus 17 SJR iPark 33 Divyasree Tech Park (SEZ) 2 Tata Xylem 18 Shailendra Tech Park 34 John F. Welch Technology Centre 3 Brigade Metropolis 19 Neil Rao Towers 35 Tesco campus 4 Bhoruka IT Park 20 SAP Labs 36 TCS campus 5 JanapriyaPride 21 RMZ Nxt 37 First Technology Park 6 Tata Elxsi 22 RMZ Centennial 38 Fortune Softech Park 7 Prestige Shantiniketan 23 Infinite Computer Solution campus 39 Subramanya Tech Park 8 UmiyaSuntech 24 GVR Tech Park 40 ITPB 9 DivyasreeNREnclave 25 Kalyani Platina 41 ITPB (SEZ) 10 Embassy Crest 26 iGate Global Solution campus 42 Brigade Tech Park 11 B. Raheja Whitefield Palms 27 Adarsh Eco Place 43 Salarpuria GR Tech Park 12 Gopalan Global Axis (SEZ) 28 Netra Tech Park 44 HM Tech Park 13 Windmills of your mind 29 Mfar Silverline Tech Park 45 Hindustan Unilever R&D Centre 14 Renaissance First Face 30 Dell (formerly Perot systems) campus 46 Sigma Soft Tech Park 15 Prestige Featherlite TechPark 31 GE 47 Embassy Paragon 16 L&T Infotechcampus 32 Sobha Renaissance campus 48 Bearys Global Research Triangle 10
  11. 11. Bangalore: Whitefield and Electronic City IT/ITeS Growth Corridor Series Figure 4: Electronics City-IT Growth Hub 2 1 To Bangalore N 42 3 8 41 4 40 9 7 6 5 EC2 39 35 36 10 34 11 EC1 37 EC3 12 13 14 38 15 Bio Technology Park 20 16 18 19 17 21 33 22 32 22 27 23 26 24 Neeladri Road 31 25 28 30 29 To Hosur (NH7) Non - captive Spaces Captive Spaces Residential Locations Operational Non-SEZ spaces Operational Non-SEZ spaces Upcoming Malls Under-construction Non-SEZ spaces Existing Hotels/ Serviced Apartments Operational-SEZ spaces Upcoming Hotels/ Serviced Apartments ELCIA 1 Xsysys Technologies 15 Surya Sapphire (HCL) 29 2 Venkatadhri IT City 16 HCL Technologies 30 Harita IT Park 3 HP 17 CGI 31 Wipro 4 Synova 18 NCST CDAC 32 Majestic Towers 5 Infosys 19 Hiranandani Upscale 33 Omni Systems 6 Yokogawa 20 United Telecom 34 Aishwarya Hitech Park 7 VelankaniIT Park 21 SVR Fortune 35 Confident Octanes 8 Salarpuria Infozone 22 Venkateshwara Techno Park 36 Global Tech Park 9 SJR Equinox 23 Genpact 37 Semicon Park 10 Surya Wave (HP) 24 Parthik Tech Park 38 Sri Ranga IT Park 11 Equinox (Wellman Fargo) 25 Surya I (HP) 39 32 TCS 12 Siemens 26 Cyber Park 40 Mahindra Satyam 13 Prestige Alecto 27 STPI Units 41 Q-Four 14 JPIT Park 28 FortuneTech Park 42 Fidelity11
  12. 12. Bangalore: Whitefield and Electronic CityIT/ITeS Growth Corridor Series Figure 5: Hosur Road - IT Growth Hub To Jayanagar. Silk Board Jn. To ORR (Sarjapur) N BTM Layout 1 HSR Layout Bommanahalli 3 2 4 7 5 8 6 Devarachikanahalli 9 10 Kudlu Gate 11 HAL Layout Akshayanagara NICE Corridor 12 13 14 16 15 To Mysore Road EC1 EC2 EC3 To Hosur (NH7) Non - captive Spaces Residential Locations Operational Non-SEZ spaces Upcoming Malls Under-construction Non-SEZ spaces Existing Hotels/ Serviced Apartments Upcoming Hotels/ Serviced Apartments 1 Maruthi Chambers 7 Chamundi Towers 13 Span Centre 2 Champak Pragathi 8 GNR Building 14 Prestige Alpha 3 ARR Building 9 Ozone Manay Tech Park 15 Commercial Complex 4 Gold Hill Square 10 SSB Tech Park 16 Ahmed Plaza 5 AMR Tech Park 11 AM IT Park 6 AMR Tech Park 12 Salarpuria Symphony 12
  13. 13. Bangalore: Whitefield and Electronic City IT/ITeS Growth Corridor Series Figure 6: Whitefield – Non-captive Office Space SummaryWhitefield and Electronics City micro-marketsaccount for 45% of Bangalore’s total non-captive IT sqft. (in millions) 50operational office space. 40 30 Vestian 25.6 Estimate 20 20.6 15.7 10 5.1 1.0 0 Operational U/C Planned (2010 - 12) (2012 and beyond) Total Stock Occupied• Whitefield has over 25 million sqft operational IToffice space, of which 10 million sqft is vacant; in Figure 7: Electronics City – Non-captive Office Space Summarycomparison, Electronics City has over 8.2 million sqft. (in millions)sqft operational IT office space and 3.3 million sqft 14is vacant. 12• Persistent high vacancy rate over the last 3 years 10in Whitefield region for Non-SEZ space resulted in 8 8.2drop in construction activity. As of Q3 2010, 2.9 6 Vestianmillion sqft & 2.2 million sqft of Non- SEZ and SEZ Estimate 4.9office space respectively is under construction; 4 4.3 3.4whereas Electronics City has 3.4 million sqft of 2office space under construction. 0• Planned supply is pegged at 20.6 million sqft and Operational U/C Planned (2010 - 12) (2012 and beyond)4.3 million sqft in Whitefield and Electronics Cityrespectively. Total Stock Occupied Table 3: Whitefield & Electronics City – Supply Summary (in million sqft) Whitefield & EPIP Zone Electronics City & Hosur Road Space Details Non SEZ SEZ TOTAL Non SEZ SEZ TOTALNon-captive Space Operational Space 22.0 3.6 25.6 8.2 - 8.2 Under construction Space 2.9 2.2 5.1 3.4 - 3.4 Pre-committed Space - 1.0 1.0 - - - Vacant Space 9.9 - 9.9 3.3 - 3.3 Planned Space 3.5 17.1 20.6 0.8 3.5 4.3Captive Space Existing Captive Office Space (A+B) 10.5 0.2 10.7 13.1 5.1 18.2 Office Space (A) 7.7 0.2 7.9 8.9 5.1 14.0 Manufacturing and other space (B) 2.8 - 2.8 4.2 - 4.2 Planned Captive Space 2.5 1.1 3.6 4.0 1.1 5.1Source: Vestian Research13
  14. 14. Bangalore: Whitefield and Electronic CityIT/ITeS Growth Corridor SeriesBoth the micro-markets have shown Table 4: Whitefield & Electronics City – Operational & Under construction Non - captive IT Parkssignificant variation in occupancy levelsacross different building types. SBA Micro-location Name of the Park (million sqft) International Tech Park, 2.3 Bangalore• The only Grade A (Premium) Class building – Prestige Shantiniketan 3.1ITPB located in Whitefield registered 100%occupancy levels. ITPB has always witnessed high Operational Brigade Summit 0.8occupancy levels on account of compliance with DivyaSree Technoparkinternational standards for building design and Phase I (SEZ) 1.3park management, superior common amenities Gopalan Global Axisand elite tenancy profile. Phase I (SEZ) 1.8 Whitefield• Operational Grade A buildings across both the Bearys Global Triangle 1.3micro markets registered 70% occupancy levels. In Phase II & IIIWhitefield, the vacancy levels for Grade A GVR Techpark 0.8buildings have touched 5 million sqft aftercommissioning of 3.1 million sqft Prestige Under Gopalan Global Axis 1.0Shantiniketan Park in Q3, 2010. construction Phase II (SEZ) DivyaSree Technopark• But, Grade B+ buildings typically small sized 0.6 Phase II (SEZ)developments with limited common amenities International Tech Park,are witnessing high vacancy rates across both the 0.5 Bangalore (SEZ)micro-markets. Salarpuria Infozone 0.4 Velankani Technology Park 0.8 Operational Cyber Park 0.4 Electronics E-City 0.7 City Hiranandani Upscale 0.8 Under Wellman Fargo 0.3 construction Harita IT Park 0.4 Table 5: Whitefield & Electronics City - Space Distribution as per Building Type Total operational Total vacant space Occupancy Building Type* space (million sqft) (million sqft) Levels Grade A 2.8 0.0 100% (Premium) Whitefield Grade A 17.0 5.0 70% Grade B+ 5.8 4.9 16% Grade A NA NA NA Electronics (Premium) City Grade A 5.9 1.8 69% Grade B+ 2.3 1.5 33%* Note: The developments across Whitefield and Electronics City are classified in three classes – Grade A (Premium), Grade A and Grade B+ based on the reputation of thedeveloper, common amenities, size of the development, tenancy profile and professionalism in operation and maintenance levels. 14
  15. 15. Bangalore: Whitefield and Electronic City IT/ITeS Growth Corridor SeriesWhitefield has 20% of Bangalore’s total operational non-captive IT/ITeS SEZ space. It is likely toretain the same share in short term but is expected to witness a drop in percentage in mediumterm.• Whitefield has 3.6 million sqft of operationalIT/ITeS SEZ space in Divyasree Technopark, GopalanGlobal Axis and ITPB. Another, 2.2 million sqftIT/ITeS SEZ space is under construction in existingSEZs.• Whitefield has potential of additional 17.1 millionsqft of IT/ITeS SEZ office space. Planned non-captiveIT/ITeS SEZ developments include Fortune City (a JVbetween Salarpuria and Adarsh), ChaitanyaInfrastructure and Brooke Bond Real Estate PrivateLimited.• In comparison, Electronics City currently has onlycaptive IT/ITeS SEZs. In future, Patel Realty has plansto develop a non-captive IT/ITeS SEZ in its integratedtownship – Neo Town, Hosur Road.• Gopalan Biopolis in Whitefield and Biotech SEZpromoted by KIADB in Electronics City are theplanned biotech SEZs. Table 6: Whitefield & Electronics City – Non-captive IT/ITeS SEZ Status Land AreaMicro-market Name of Park Location Status Comments (acres) 0.64 million sqft (phase II) is Notified and 1.3 million under-construction with a DivyaSree Technopark EPIP Zone, Whitefield 73 sqft is operational space total development potential of ~7 million sqft Notified with 1.8 million 1.0 million sqft is under- Gopalan Global Axis Hoodi, Whitefield 26 sqft of operational space construction Currently, 0.54 million sqft is Whitefield Notified and has 0.45 International Tech Park, under-construction with a Whitefield Road 27 million sqft of operational Bangalore (ITPB) development potential up to BTS facility 3 million sqft Chaitnaya Infrastructure Whitefield Main Road 51 Formally approved Planned Brookebond Real Estate Pvt. ITPB Main Road, 28 Formally approved Planned Ltd. Whitefield Fortune City (JV between Adarsh Group and Sattva Whitefield 38 Formally approved Planned Group) Electronics Patel Realty India Ltd Thirupalya 64 Formally approved Planned City Thirupalya (Electronics City) (Electronics City)15
  16. 16. Bangalore: Whitefield and Electronic CityIT/ITeS Growth Corridor SeriesFor 2010, expected gross absorption for non-captive IT office space in Whitefield andElectronics City micro- markets is 2.3 millionsqft and 0.8 million sqft respectively .• Till Q3 2010, Whitefield and Electronics City micro-markets registered annual office space absorption of1.7 million sqft and 0.46 million sqft respectively. Inboth the micro-markets, 80% of the absorption isdriven by expansion of existing operations or new set-ups; only balance 20% supported relocation andconsolidation of operations.• Estimated fresh supply for 2010 in Whitefield andElectronics City is 5.7 million sqft and 1.2 million sqftrespectively.• Major projects completed in 2010 include PrestigeShantiniketan (3.1 million sqft) and Kalyani Platina – II(0.42 million sqft) in Whitefield; and, E City Tower – II(0.36 million sqft), Confident Octanes (0.15 millionsqft) & SJR Equinox (0.15 million sqft) in ElectronicsCity. Table 7: Whitefield & Electronics City – 2010 Key Lease Transactions Area leased Location Tenant Name Building Category Type of Space (sq.ft.) Infinite Computer Solutions Gopalan Global Axis SEZ 1,00,000 Bare Shell L&T Infotech Gopalan Global Axis SEZ 1,00,000 Bare Shell Whitefield Sonus Networks Prestige Shantiniketan Non SEZ 1,50,000 Fully-furnished TCS Gopalan Global Axis SEZ 4,00,000 Bare Shell eMids Technologies Sri Ganesh Complex Non SEZ 40,055 Fully-furnished Electronics City & Hosur HP Pratik Tech Park Non SEZ 72,000 Warm Shell Road Flextronics SVR Fortuna Non SEZ 90,000 Warm Shell 16
  17. 17. Bangalore: Whitefield and Electronic City IT/ITeS Growth Corridor SeriesAverage office space rentals are comparable for Whitefield and Electronics City micro-markets forGrade B+ buildings but Grade A buildings in Whitefield command 25% higher rentals compared tosimilar buildings located in Electronics City.• For the last decade, ITPB [Grade A (Premium)] has Table 8: Whitefield & Electronics City – Average Rentals*been consistently charging 50% higher rentals ( INR/sqft/month )compared to other Grade A buildings located in Whitefield & Hosur ElectronicsWhitefield. Road City Building Type EPIP Zone• Grade A (Premium) and Grade A buildings have SEZ Non SEZ Non SEZ Non SEZnot only witnessed high occupancy levels but also Grade A 45 45 - -rentals for the same have been less volatile as (Premium)compared to other buildings. During the economic Grade A 30 28 - 32 25 - 27 22 - 24slowdown phase (Q4 2008 – Q4 2009) the rentalsacross both the micro markets witnessed drop of Grade B+ - 20 - 22 18 - 22 17 - 2010%, 20% and 30% for Grade A Premium, Grade A Note: * For Warm Shell spaceand Grade B+ properties respectively.17
  18. 18. Bangalore: Whitefield and Electronic CityIT/ITeS Growth Corridor SeriesInstitutional investors and retail investors • In short term, the capitalization rate is expected to(HNIs) are capitalizing Grade A buildings at remain at the current levels if not going up further.11-12% and 9 - 10% respectively. Primarily reason behind modest future is the prevailing high vacancy rates and investor’s interest• In recent period, both the micro-markets wit- in other emerging micro-markets.nessed limited sale activity in office space segment. • Average quoted rates for Grade A building acrossThe reason is the wide gap between the developer’s both the micro-markets is INR 3800 per sqft. But,expectation and investor’s expectation. Currently, buildings such as Tata Xylem (LEED Certified),the institutional investors and retail investors (HNIs) Whitefield and Hiranandani Upscale, Electronicsare capitalizing Grade A buildings at 11% -12% and City are quoting capital rate as high as INR 4,800 per9%-10% respectively. Grade B+ buildings are capped even higher rates. Table 9: Whitefield & Electronics City – Average Capital Values* (INR/sqft) Institutional Retail (HNI) Building Developers Investors Investors Type Expectation Expectation Expectation Grade A 3,800 3,000 – 2,500 3,400 – 2,800 Grade B+ 3,500 2,500 – 2,000 2,750 – 2,250Note: * For Warm Shell space 18
  19. 19. Bangalore: Whitefield and Electronic City IT/ITeS Growth Corridor Series Table 10: Whitefield & Electronics City – Captive SpacesIn Whitefield, 1/4th of the total operational Approximateoffice space is captive whereas in Electronics Name of the Land Area Remarks CompanyCity captive space share is 2/3rd of the total (acres)operational office space. Whitefield EPIP Zone GE India John F Welch Technology Centre is• Whitefield and Electronics City account for 85% of Technology 50 an integrated multi-disciplinarythe total captive IT office space of the city. Centre Pvt. Ltd. research and development centre• In Electronics City, land allotment to companies SAP Labs India is SAPs secondled to limited land availability for non-captive largest Research & Development SAP Labs 22developments; whereas in Whitefield EPIP Zone, and Global Services & SupportKIADB allotted land to companies but abundant centre in the worldland was available in EPIP and outside EPIP Zone fornon-captive developments. It is global delivery centre and has I Gate 10 been developed over 3 phases• In Whitefield, NetApp and Huawei Technologiesare planning to start construction for their captive Tata Consultancy TCS a IT consulting, services &units in near future. 3 Services BPO organization• In addition, Whitefield and Electronics City have NetApp Currently land has been acquired 152.8 million sqft and 4.2 million sqft under manufac- Huaweituring and other industrial spaces. 20 1 million sqft of office space is Technologies under-construction Electronics City The company headquarters is Infosys 108 located in phase I of Electronics City Located in Electronics City Mahindra Mahindra Satyam development Figure 8: Whitefield & Electronics City – Captive Spaces Satyam 23 Centre has potential for further Software development sqft. (in millions) 25 A drug discovery and biotech 20 5.1 Aurigene company having close to 425 Discovery 17 people working in the campus 15 14 Technologies across Electronics City II 3.6 10 Wipro technologies is located in 7.8 Wipro Limited 13 phase I of Electronics City 5 4.2 Tata 2.8 Think Campus of TCS is located in 0 Consultancy 6 Electronics City Whitefield Electronics City Services Operational Space (Manufacturing and engineering companies) Currently, phase I is operational, HCL however phase II is under- Operational Space (Office space) 30 Technologies construction Planned Supply Source: Vestian Research and Karnataka Industrial Areas Development Board19
  20. 20. Bangalore: Whitefield and Electronic CityIT/ITeS Growth Corridor SeriesWhitefield is dominated by IT and ITeS companies whereas Electronics City houses sizeableelectronics manufacturing companies also.• In Whitefield region, 82% of the space is occupiedby IT/ITeS companies. Balance 18% of the space isoccupied by Gems & Jewellery, FMCG,Biotechnology, Pharmaceutical, multidisciplinaryR&D organizations involved in automobile, aviation,healthcare, manufacturing and other sectors.• In Electronics City, only 56% of the space isoccupied by IT/ITeS companies, 22% by biotechnol-ogy companies, 15% by electronics & allied manu-facturing units (cables, power electronics &industrial electronics, circuit boards, electron guns,engineering instruments, aerospace components,tool & die casts, high precision components, etc)and balance 8% is occupied by Engineering andservices companies.• In Whitefield, more than 90% companies areMNCs; in comparison, 65% of the companiesoperating in Electronics City are India based firms. Figure 9: Whitefield – Occupier Profile 18% 54% 28% IT ITeS Others 40% 50% 30% 40% 30% 20% 20% 10% 10% 0% 0% Software Engineering and Support Services IT and Telecom BFSI Healthcare Retail/ Others R&D Development Manufacturing/ Media & Entertainment 20
  21. 21. Bangalore: Whitefield and Electronic City IT/ITeS Growth Corridor Series Figure 10: Electronics City - Occupier Profile 1% 22% 38% 7% 15% 18% IT ITeS Manufacturing Electronics Engineering Companies Biotech Others 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% IT and Telecom BFSI Healthcare Retail/ Others Software Engineering Support Manufacturing/ Development and R&D Services Media & Entertainment21
  22. 22. Bangalore: Whitefield and Electronic CityIT/ITeS Growth Corridor SeriesGrowth in Whitefield & Electronics City is witnessing stagnation due to rise of alternate IT/ITeSCorridors – Outer Ring Road and Bangalore North.• In the medium term, both Whitefield andElectronics City micro-markets are expected towitness lower growth rate compared to their early2000 levels due to high activity in ORR and emer-gence of Bangalore North.• Even though, many developers have notifiedIT/ITeS SEZs in Whitefield, few of them are yet notconfident to start the development works onaccount of occupier’s preference for ORR andBangalore North.• As per market intelligence, many companies in ITand ITeS sectors have plans for expansion in the year2011. Therefore, rate of annual absorption in 2011 isexpected to be maintained at least at 2010 levels• In both the micro-markets, rentals for Grade B+buildings are likely to remain under downwardpressure owing to high vacancy rate, while rentalsfor SEZ space in Whitefield is expected to witness arise.• Vacancy levels for Grade A buildings in Whitefield& Electronics City are expected to drop in next 12months and as a result rental levels will strengthenin short term.• Electronics City has limited land for futuredevelopment and the growth may spill over toElectronics City - Sarjapur Road, where Infosys andWipro have acquired land for their future develop-ments. As per market sources, Infosys is planning tocommence second software development centre inthis region.• The next major development in Whitefield regionis expected along proposed PRR towards Hoskote.Beary’s Group has already developed GlobalResearch Triangle Park Phase 1 in Whitefield AshramRoad and Ittina Properties has a notified IT/ITeS SEZin Hoskote. However, the anticipated growth alongthis region is likely to happen at a slower pace. 22
  23. 23. Bangalore: Whitefield and Electronic City IT/ITeS Growth Corridor Series ACRONYMS ORR -Outer Ring Road INR Indian National Rupees Jn. Junction MNCs Multinational Companies IT Information Technology ITeS Information Technology Enabled Services CBD Central Business District SBD Suburban Business District PBD Peripheral Business District ITPB International Tech Park, Bangalore (Formerly known as ITPL) KIADB Karnataka Industrial Areas Development Board ELCIA Electronics City Industries Association EPIP Export Promotion Industrial Park ITI Indian Telephone Industries NTTF Nettur Technical Training Foundation KSSIDC Karnataka State Small Industries Development Corporation KTPO Karnataka Trade Promotion Organization PRR Peripheral Ring Road BDA Bangalore Development Authority BETL Bangalore Elevated Tollway Limited BMRCL Bangalore Metro Rail Corporation Limited LEED Leadership in Energy and Environmental Design NICE Nandi Infrastructure Corridor Enterprises JV Joint Venture SBA Super Built-up Area SEZ Special Economic Zone STPI Software Technology Parks of India DTC Direct Tax Code PSU Public Sector Undertakings BIA Bangalore International Airport Q1 Quarter 1 (January – March) Q2 Quarter 2 (April – June) Q3 Quarter 3 (July – September) BTS Built to Suit BFSI Banking Financial Services and Insurance R&D Research and Development FMCG Fast Moving Consumer Goods HNI High Net worth Individual FSI Floor Space Index23
  24. 24. Bangalore: Whitefield and Electronic CityIT/ITeS Growth Corridor Series Authors As a part of Strategic Advisory Group, Dhara contributes to property market reports, research papers as well as client assignments. She has over 4 years of experience and has worked on consultancy assignments across commercial, residential, hospitality, retail and industrial sectors. She holds an engineer degree with M.Tech in planning from CEPT University, Ahmedabad. Dhara Dalal Manager Strategic Advisory Group, +91 80 40620108 Shailendra contributes to property market reports, research papers as wellas client assignments. Shailendra has over 4 years of experience in real estate and has worked on consultancy assignments across varied sectors namely commercial, residential, hospitality, retail and industrial. He is an engineer and holds a MBA degree from Ohio University, USA. Shailendra Manager Strategic Advisory Group Chandrasekar, +91 80 40620121 Gorakh serves as Assistant Vice President and heads the Strategic Advisory Group. He guides the team and is responsible for research output as well as client assignments. With over 8 years of work experience in consulting and advisory domain, he has executed and delivered assignments across asset classes for developers and global clients. Gorakh pursued his masters degree from Indian Institute of Technology, Delhi and holds a bachelors degree in Architecture. Gorakh Jhunjhunwala AVP, Strategic Advisory Group MRICS , +91 80 40620100 24
  25. 25. Bangalore: Whitefield and Electronic City IT/ITeS Growth Corridor Series About Us Vestian Global Workplace Services, a subsidiary of the US- headquartered Vestian Group and an international property consulting firm providing integrated end-to- end real estate solutions to occupiers. Vestian Global offers Strategic Advisory, Transaction Advisory and Project Management services. Our client base comprises blue chip multinational and private Indian corporations across sectors, and our primary value proposition is our corporate philosophy of Delivering Measurable Results, by which we deliver metrics-driven, accountable, high standard conflict-free Services with exclusive focus on tenant representation. Currently, our service platform covers key Asian markets viz. India and China; and we are in the process of planning to expand our presence to other countries in Asia Pacific and the Middle East. Strategic Advisory Group Vestian Global Workplace Services Strategic Advisory Group aligns the business strategies of corporate clients with their real estate portfolio strategy. Property market intelligence; economic, urban and space planning principles; and analyti- cal methods all come together to provide strategic insights to occupiers of real estate. Comprehensive market knowledge and extensive databases help us analyze prevailing market trends and foresee the impact of economic, social and govern- ment policies on real estate, especially their impact on end-users. Experienced application of analytical tools and methods allows us to develop innovative solutions that combine business, sectoral and geographical requirements. Our studies span industrial, office, residential, retail and hospitality sectors to include: — Portfolio assessments — Strategic location studies — Market research and assessment — Property valuations — Development feasibilities25
  26. 26. Bangalore: Whitefield and Electronic CityIT/ITeS Growth Corridor Series Contacts India Management Shrinivas Rao CEO - Asia Pacific +91 80 40620102 Strategic Advisory Group Offices Gorakh Jhunjhunwala INDIA AVP - Strategic Advisory Group +91 80 40620111 Bangalore 318, Raheja Chambers, 12 Museum Road, Transaction Advisory Bangalore-560 001 Balamurali K Director - Chennai Operations Chennai Suite No 702, +91 44 66659351 MLS Business Center Kuppu Arcade No. 4, Anthony Ravindran Venkatanarayana Road VP - Transaction Advisory T. Nagar, Chennai-600 017 +91 80 40620106 Hyderabad Sanjay Purbey Vatika Business Center AVP - Business Development 3rd Floor, NSL Icon Rd no. 12, Banjara Hills +91 44 39159351 Hyderabad-500 034 Project Management USA 200N LaSalle Street, Ramaprasad Pormavill Suite 2830 SVP - Project Services Chicago, IL 60601 +91 80 40620118 CHINA Ashok Gandhi Unit 1207, No.546, VP - Project Services Changning Road Changning District, +91 9867754537 Shanghai-200 042 26
  27. 27. AcknowledgementThe Vestian Strategic Advisory team would like to take this opportunity to extend our gratitude towards all those who have helped us in our endeavor to producethis report. We would like to especially thank the developers in Bangalore who have extended their valuable support and market information which has helpedus in ensuring authenticity of the report. We would also like to give a special mention to our Transaction Advisory Team and Workplace Support Team membersin particular- Kiran Kumar, Chandra Mohan Reddy and Manoj Joseph for their support.27