Bengaluru office market snapshot 2013 report


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• In 2013, Bengaluru market recorded highest absorption of office space among top 6 cities in India.
• Cumulative leases in the Bangalore market amounted to just over 8.66 million sq. ft. in 2013.
• New requirements were mainly from corporates seeking to realign their office requirements.
• New office supply was close to 5.5 million sq. ft., which was 28% less than the new supply in 2012.
• It is anticipated that the annual transaction volumes in 2014 will be similar to 2013.

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Bengaluru office market snapshot 2013 report

  1. 1. Bengaluru (Bangalore) Office Market Snapshot 2013
  2. 2. Bengaluru Office Market Snapshot 2013 Quarter-on-Quarter Absorption Highlights 3.5 2.88 3.0 AVERAGE ABSORPTION 2.0 1.68 1.5 1.28 1.0 0.5 0.0 1Q Demand Absorption of office space in the Bengaluru market amounted to just over 8.66 MN SF in 2013, which is 9% and 23% down recorded in the year 2012 and 2011 respectively. In the first half of the year, Bengaluru witnessed robust demand from occupiers; However there was a drastic reduction in the number of transactions in the second half of the year. There were fewer large sized transactions in 2013 as compared to previous years. In 2013 the average space size of the deals was approximately 37,000 SF, which was half of that in 2012 as most of the demand was generated by small and mid-size enterprises looking for expansion. 2.82 2.5 IN MN SF Bengaluru office market was the largest contributor to the panIndia office space absorption with a share of approximately 27% of the total area leased in 2013. However, overall occupier demand in Bengaluru has softened in 2013 as against 2012. New requirements are mainly from corporates seeking to realign their office requirements via consolidation and relocation. New office construction commencements and office development completions have been very limited. The drop in demand has been matched by drop in new supply, thereby maintaining the demand supply gap in equilibrium. 2Q 3Q 4Q Industry Wise Absorption Others 15% Telecom 2% 2 Engineering 14% 1 IT/ITeS 79% IT/ITeS remained the primary demand driver accounting for approximately 80% of the total office space absorption. The Outer Ring Road and Whitefield micro-markets remained the preferred office destination, together accounting for 55% of the total absorption. Top 10 Transactions of the Year Client Developer / Landlord Samsung Constellation Business Park Bagmane Developer 550,000 Outer Ring Road 2Q Honeywell RMZ Ecoworld RMZ CORP 500,000 Outer Ring Road 2Q JDA Mantri Commercio Mantri Developer 360,300 Outer Ring Road 3Q Cerner Manyata Embassy Tech Park Embassy Group 350,000 Outer Ring Road 1Q Columbia Asia Hospital Independent Building Sivasakthi Developer 300,000 Whitefield 1Q Amazon Brigade WTC Brigade Group 252,000 Malleshwaram West 2Q Adobe Prestige Platina Tech Park Prestige Group 250,000 Outer Ring Road 3Q Accenture Prestige Technopolis Prestige Group 250,000 Dairy Circle 3Q Symantec RMZ Ecoworld RMZ CORP 246,000 Outer Ring Road 4Q AXA Group 1 Building Name Mfar Manyata Tech Park Mfar Construction 196,250 Hebbal 4Q Bengaluru Office Market Snapshot 2013 | Colliers International Area (In SF) Location Transaction Quarter
  3. 3. Supply & Vacancy New office supply was close to 5.5 MN SF, which is 28% lesser than the new supply in 2012. Given that most of the demand was for Outer Ring Road and Whitefield, it comes as no surprise that 75% of the new supply was also located in these two micro-markets. The remainder of the new supply was evenly split between Hosur Road and Electronic City micromarkets. Due to the limited addition of new buildings, the overall market vacancy has reduced to 14% which is marginally lower than that of 2012 (15%). New Supply, Absorption & Vacancy 12 18% FORECAST 10 14% 8 12% 10% 6 8% 4 Rental & Capital Values Rentals in CBD and Electronic City remained stable. In the preferred office destinations, Outer Ring Road, Whitefield and Banerghatta Road rental values appreciated by 6 - 10% on Y-o-Y basis. Going forward, rental values in the EPIP Zone, Whitefield and ORR are expected to witness an increase due to consistent occupier’s interest especially from the IT/ITeS industry. 6% 4% 2 2% 0 2010 Development completions will continue to be below average as developers shall refrain from adding more speculative supply until the overall market improves. There are however a significant number of under construction projects in Whitefield, Outer Ring Road and towards the north Bengaluru. Overall, the prospects for office rentals increasing significantly is unlikely, barring micro-markets such as Outer Ring Road and CBD which are expected to witness modest rental increases in 2014. This could be due to a scarcity of quality office space. Rental values may be under a downward pressure in peripheral micro-markets like Electronic City and Whitefield due to higher supply ratio as compared to other micro-markets. 2 Bengaluru Office Market Snapshot 2013 | Colliers International 2011 2012 New Supply (In MN SF) 2014 Prognosis It is anticipated that the annual transaction volumes in 2014 will be similar to 2013, albeit the second half of the year is expected to be stronger than the first half, as market activity after the general elections is expected to improve and be better than now. 16% 2013 2014 F Absorption (In MN SF) 2015 F 0 Vacancy (In %) Average Rentals Trends & Forecast 60 FORECAST 50 40 30 20 10 0 2008 2009 2010 2011 2012 2013 2014 F Average Rental Trends (INR Per SF Per Month) 2015 F
  4. 4. Primary Authors: 62 countries on 6 continents United States: 140 Canada: 42 Latin America: 20 195 EMEA: 85 $2 Surabhi Arora Associate Director | Research +91 124 456 7500 Amit Oberoi National Director I Valuation & Advisory Services & Research Sachin Sharma Assistant Manager I Research For Office Services: George McKay South Asia Director I Office & Integrated Services billion in annual revenue Vikas Kalia National Director I Office Services 1.12 Yogesh Bheemaiah Director I Office Services 13,500 Technopolis Building, 1st Floor, DLF Golf Course Road, Sector 54, Gurgaon - 122 002 TEL +91 124 456 7500 billion square feet under management professionals About Colliers International Colliers International is a global leader in commercial real estate services, with over 13,500 Corporation, Colliers International delivers a full range of services to real estate users, owners and investors worldwide, including global corporate solutions, brokerage, property and asset management, hotel investment sales and consulting, valuation, consulting and appraisal services, Copyright © 2014 Colliers International. ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.