The Knowledge Report India Office Property Market Overview 2Q 2012

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Even though the economy had showed signs of weakening in the last quarter, most of the commercial markets remained active in terms of commercial leasing. Demand was primarily in the form of relocation and consolidations as companies were looking for more cost effective solution for their real estate requirement. Rental values for grade ‘A’ office space remained stable in almost all the major markets across India in 2Q 2012. Looking forward, we are expecting demand to be moderate amid a weaker global economic outlook.

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The Knowledge Report India Office Property Market Overview 2Q 2012

  1. 1. OfficeProperty Market OverviewINDIAQUARTERLY UPDATE | JULY | 2012Accelerating success.
  2. 2. 2Q 2012 | OFFICEResearch & forecast reportSYDNEY CENTRAL BUSINESS DISTRICTresearch & forecast ReportIndia office market MACRO ECONOMIC OVERVIEW ECONOMIC INDICATORS • GDP growth rate saw a sharp reduction to 5.3% during 1Q 2012. The most impacted Gross Domestic Product at factor cost sector included agriculture, mining & 10.0% 9.0% quarrying, manufacturing and construction. 8.0% Prime reasons attributed to this were 7.0% 6.0% uncertainties in domestic policy, cumulative 5.0% impact of monetary tightening and slackening 4.0% 3.0% of external demand. 2.0% 1.0% 0.0% • Inflation as measured by the wholesale price Jan - Mar 09 Apr - Jun 09 Jul - Sep 09 Oct - Dec 09 Jan - Mar 10 Apr - Jun 10 Jul - Sep 10 Oct - Dec 10 Jan - Mar 11 Apr - Jun 11 Jul - Sep 11 Oct - Dec 11 Jan - Mar 12 ECONOMIC BAROMETER index (WPI), was 7.55%, 7.23% & 7.69% in May, April & March 2012, respectively. There Jun-11 Jun-12 was upward pressure on the WPI, due to FDI in Real Estate steep price increase of vegetable, milk, pulses 16,000 REPO RATE 7.50% 8.00% & protein based items. While inflation remain 14,000 a concern, the WPI stands 200 basis lower in 12,000 REVERSE REPO 6.50% 7.00% 10,000 RATE 2Q 2012 as compared to the same period last 8,000 INR Crore CRR 6.00% 4.75% year. 6,000 4,000 • Early in this quarter, RBI cut the repo and 2,000 INFLATION 9.51% 7.55% 0 reverse repo rates by 50 basis points each to 2005 - 06 2006 - 07 2007 - 08 2008 - 09 2009 - 10 2010 - 11 2011-12 April 12 PRIME LENDING Rate 9.25% - 10.00% 10.00% - 10.50% boost the economy. However, the increased DEPOSIT RATE inflation rate has left a limited scope for (<1 YEAR) 7.75% - 9.50% 8.00% - 9.25% further reduction in repo rates. BSE Sensex & Realty Index Foreign Ex- 120 change 45.18 55.68 • The rupee remained under pressure and 115 INR - USD depreciated further against both the EURO 110 105 and the US Dollar as foreign investors were 100 INR- Euro 63.25 70.04 worried about persisting inflation, and the 95 high fiscal and current account deficit. The 90 85 Rupee closed at INR 55.68 to 1 USD and INR 80Return on Alternative Investments 70.04 to 1 Euro as on 15th June 2012. 2-Apr-12 11-Apr-12 20-Apr-12 29-Apr-12 8-May-12 17-May-12 26-May-12 4-Jun-12 13-Jun-12 22-Jun-12 1-Jul-12 Jun-11 Jun-12 YoY % • The Department of Industrial Policy and * Rebase to 100 BSE Sensex Realty Index Change Promotion (DIPP) recorded a total FDI inflow Gold 22,114 30,097 36.10% for April 2012 in at $ 1.85 billion which is 41% 120 Exchange Rates lower as compared to $ 3.12 billion in April 115 SILVER 52,590 54,494 3.62% 2011. The housing and construction sectors 110 contributed only 2.96% to the total FDI 105 EQUITY (BSE 100 received. 95 SENSEX) 18,132 16,949 -6.52% 90 REALTY INDEX 2,123 1,623 -23.55% 85 80 1-Apr-12 10-Apr-12 19-Apr-12 28-Apr-12 7-May-12 16-May-12 25-May-12 3-Jun-12 12-Jun-12 21-Jun-12 30-Jun-12 Note : As on 15th June 2012 USD Euro * Rebase to 100 Source: Colliers International India Researchwww.colliers.com
  3. 3. INDIA | 2Q 2012 | OFFICE MUMBAI AVAILABLE Supply in Prime Areas • During 2Q 2012, approximately 9.4 million sq.ft. of grade ’A’ office space was available Goregoan / JVLR 8% Kalina 1% for lease and sale, primarily concentrated in Worli / Prabhadevi 1% Powai 4% Andheri East, Lower Parel and Thane/ LBS Malad 5% Thane / LBS 22% Marg. Navi Mumbai 6% • The city’s grade ‘A’ inventory was added by CBD 1% 0.2 million sq.ft. of new supply in SBD this quarter by “Star Hub” project of Star Lower Parel 19% Developers at Andheri East. Andheri East 24% BKC 9% • During the surveyed quarter, construction activities remained moderate. Due to a slowdown in the economy, developersMUMBAI remained cautious and hesitant in undertaking 2Q 2012 GRADE ‘A’ AND GRADE ’B’ further construction activities, thus, no new RENTAL VALUES projects were launched in the market.CITY OFFICE BAROMETER 300 • Rental levels of grade ‘A’ office space remained 250 1Q 2012 2Q 2012 stable across all the micro markets except 200 BKC (Bandra-Kurla-Complex) where rents 150 INR Per Sq ft Per Month VACANCY increased by 3% q-o-q due to limited supply 100 and demand from corporates. ABSORPTION 50 0 • Going forward, the rental values for grade ‘A’ CBD Andheri East BKC Lower Parel Malad Navi Mumbai Powai Worli/Prabhdevi Goregaon / JVLR Kalina Thane / LBS Andheri East (IT) Lower Parel (IT) Malad (IT) Navi Mumbai (IT) Powai (IT) Goregaon / JVLR (IT) Thane / LBS (IT) CONSTRUCTION office space are expected to remain stable in RENTAL VALUE almost all micro markets. Grade A Grade B • In this quarter, the state revenue department revised the Land Lease Policy and imposed a 7.5% premium on the market value of the GRADE ‘A’ AVERAGE RENTAL VALUE land/plots leased for redevelopment of prime office space rental trend residential, educational and religious activities, 245 whereas 10% for other activities. 420 Forecast 370 210 • During the same period, Peninsula Land sold 320 175 off its office building located at Lower Parel to 270 220 various financial services firms namely TataINR per Sq ft per Month 140 INR per Sq ft per Month 170 105 Capital, National Realty, India Nivesh Insurance 120 Brokers and Tata AIG Life Insurance. 70 70 20 1Q2008 2Q2008 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 4Q2009 1Q2010 2Q2010 3Q2010 4Q2010 1Q2011 2Q2011 3Q2011 4Q2011 1Q2012 35 2Q2012 0 CBD Andheri East Malad BKC 1Q2008 2Q2008 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 4Q2009 1Q2010 2Q2010 3Q2010 4Q2010 1Q2011 2Q2011 3Q2011 4Q2011 1Q2012 2Q2012 1Q2013F 2Q2013F 3Q2012F 4Q2012F Lower Parel Navi Mumbai Powai Worli / Prabhadevi Goregaon Kalina Thane / LBS / JVLR MARKET TRANSaCTIONS CLIENT building name AREA LOCATION TRANSACTION (Sq. Ft.) TYPE Devon Supreme Business Park 56,000 Powai Lease Famy Care Peninsula Corporate Park 15,000 Lower Parel Lease Lodha I Think 40,000 Thane Lease Reliance Digital Times Square 26,000 Andheri Lease Tata Tesco Kohinoor Business Park 50,000 Vidyavihar Lease Vships Lotus Midtown 27,000 Kalina Lease Source: Colliers International India Research Colliers International | p. 3
  4. 4. INDIA | 2Q 2012 | OFFICE DELHI AVAILABLE Supply in Prime Areas • pproximately 1.0 million sq.ft. of grade ‘A’ A office space was ready for lease / sale in Nehru Place 10% 2Q 2012 located mainly in Saket and Jasola neighborhoods of Delhi. Connaught Place 2% • Fast paced construction activities were Saket 29% observed in a newly developed area near Delhi Airport namely Aerocity. Two projects located at Aerocity such as “Aria Signature Office” Jasola 59% and “IBIS Commercial Tower” developed by JW Marriot and IBIS Hotel respectively, added approximately 0.2 million sq.ft. of commercial grade ’A’ office during this quarter.delhi • A new commercial project “Caddie Commercial 2Q 2012 GRADE ‘A’ AND GRADE ’B’ Tower”, was launched by Caddle Hotel with RENTAL VALUES an area of 0.1 million sq.ft. in Aerocity. TheCITY OFFICE BAROMETER project is expected to be complete by end of 400 2013. 350 300 1Q 2012 2Q 2012 250 • Overall absorption was restrained in 2Q INR per Sq Ft per Month 200 VACANCY 2012 in comparisons to last quarter as both 150 investors and end-users were following wait 100 ABSORPTION and watch policy due to prevailing economic 50 CONSTRUCTION uncertainties. 0 Nehru Place Jasola Saket Netaji Subhash Place Connaught RENTAL VALUE • In 2Q 2012, rental values for grade ‘A’ Grade A Grade B properties increased in the range of 2 to 7% on q-o-q in locations such as Connaught Place and Nehru Place, however negative corrections in the range of 4 to 10% were GRADE ‘A’ AVERAGE RENTAL VALUE registered in Jasola and Saket. prime office space rental trend 280 • Office rent prognosis reveal further stability 450 245 Forecast for grade ‘A’ office space in the market on 400 210 account of economy slowdown and limited 350 supply. 300 175 250 INR per Sq ft per MonthINR per Sq ft per Month 140 200 105 150 100 70 50 35 0 2Q2008 3Q2008 4Q2008 1Q2008 2Q2009 3Q2009 4Q2009 1Q2009 2Q2010 3Q2010 4Q2010 1Q2010 2Q2011 3Q2011 4Q2011 1Q2012 2Q2012 0 2Q2008 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 4Q2009 1Q2010 2Q2010 3Q2010 4Q2010 1Q2011 2Q2011 3Q2011 4Q2011 1Q2012 2Q2012 3Q2012F 4Q2012F 1Q2013F 2Q2013F Nehru Place Jasola Cannaught Saket place Netaji Subhash MARKET TRANSaCTIONS CLIENT building name AREA LOCATION TRANSACTION (Sq. Ft.) TYPE Barista Independent Building 10,000 Okhla Phase I Lease CPM C-126 12,000 Okhla Phase I Lease Hitachi Konnectus 25,000 Minto Road, C.P Lease Marico DLF Towers 4,300 Jasola Lease Source: Colliers International India Researchp. 4 | Colliers International

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