OfficePrOPerty Market OverviewiNDiaQUarterLy UPDate | OctOBer | 2011Accelerating success.
3Q 2011 | THE KNOWLEDGEREsEARCh & fORECAsT REpORTsYDNEY CENTRAl BusINEss DIsTRICTRESEARCH & foRECAST REPoRTINDIA offICE MARkET MACRO ECONOMIC OVERVIEW ECONOMIC INDICATORs • The Reserve Bank of India further-reduced the GDP growth estimate for 3Q 2011 to 8.0 Gross Domestic product at factor cost percent as compared to previous quarter GDP 10.00% 9.00% of 8.3 percent. This was primarily due to 8.00% downgrade revision of GDP estimate for the 7.00% 6.00% agriculture and industry sectors from the 5.00% previous round of surveys. 4.00% 3.00% 2.00% • The Reserve Bank of India (RBI) has tightened 1.00% 0.000% monetary policy again this quarter and the 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 ECONOMIC BAROMETER repo rate increased from 7.25 percent to 8 percent by July 2011. sep-10 sep-11 • Inflation was recorded at 8.40 percent this 16000 fDI in Real Estate REPo RATE 6.0% 8.50% quarter as compared to 9.44 percent during 14000 2Q 2011. However, the Prime Minister 12000 REvERSE REPo RATE 5.25% 7.00% 10000 Economic Advisory Council estimate that 8000 headline WPI will remain elevated till Nov’ 11 INR Crore CRR 6.00% 6.0% 6000 at 9 percent or even higher and will soften 4000 INfLATIoN 9.8% 8.40% only from Dec’ 11 onwards. 2000 0 2005 - 06 2006 - 07 2007 - 08 2008 - 09 2009 - 10 2010 - 11 April 2011 TREASuRy BoND RATE 7.8% 8.31% • The overall market momentum slowed down as compared to the previous quarter. SluggishfIxED DEPoSIT (< 1yEAR) 7.25% 9.25% economic conditions worldwide and increased foREIGN ExCHANGE cost of inputs and debt are attributed as the 130 BsE sensex & Realty Index INR - uSD main reason. 120 46.37 47.80 110 INR- EuRo 59.63 65.11 • The higher cost of debt compelled over- 100 leveraged developers to look for options to 90 liquidate their land banks and existing 80RETuRN ON AlTERNATIVE INVEsTMENTs projects. 70 1-Jul-11 7-Jul-11 13-Jul-11 19-Jul-11 25-Jul-11 31-Jul-11 6-Aug-11 12-Aug-11 18-Aug-11 24-Aug-11 30-Aug-11 5-Sep-11 11-Sep-11 17-Sep-11 23-Sep-11 29-Sep-11 sep-10 sep-11 YoY % • In major development for the real estate Change sector, draft land acquisition policy was *Rebase to 100 BSE Sensex Realty Index finalised by the law commission this quarter. GoLD 19,087 27,856 45.94% This policy is an amendment to the Land Exchange Rates 115 32,592 64,550 98.05% Acquisition Act, 1894, which will ensure SILvER 110 owner friendly acquisition of land and will EQuITy (BSE enable the government to frame a land 105 SENSEx) acquisition policy from time to time. 100 19,208 16,467 -14.27% 95 REALTy INDEx 3,627 1,721 -52.53% • This quarter, the Real Estate regulation bill 90 has been sent to union law ministry for its 85 1-Jul-11 8-Jul-11 15-Jul-11 22-Jul-11 29-Jul-11 5-Aug-11 12-Aug-11 19-Aug-11 26-Aug-11 2-Sep-11 9-Sep-11 16-Sep-11 23-Sep-11 30-Sep-11 comments and clearance. The new bill excludes the subjects of land and colonisation, *Rebase to 100 uS$ Euro as they are both state subjects. The bill is expected to be introduced in the winter season Source: Colliers International India Research of parliament.www.colliers.com
THE KNOWLEDGE REPORT | 3Q 2011 | Office | MUMBai MuMBAI supplY IN pRIME AREAs • In Mumbai, approx 11.0 million sq ft of grade ‘A’ office space was ready for fit-out in 3Q CBD 0.5% 2011. out of this total available stock around LBS / Thane 21% Andheri East 21% 65 percent was IT/ITES office space primarily concentrated in kalina and Lower Parel. BkC 5% kalina 1% • 0.3 million sq ft of new supply was added Goregaon / JvLR 8% to the city’s grade ‘A’ inventory in the SBD this quarter. The project/part of the project Worli/Prabhdevi 1% Lower Parel 23% contributed this new supply was “Equinox Powai 6% Business Park – Tower 3” developed by Navi Mumbai 9 % Malad 5% Equinox Realty & Infrastructure Private Limited.MuMBAI • This quarter oberoi Realty launched a commercial project named “Prisma” 3Q 2011 GRADE ‘A’ AND GRADE’B’ RENTAl VAluEs admeasuring approximately 0.7 million sqCITY OffICE BAROMETER ft located at Jogeshwari - vikhroli Link 300 Road (JvLR). The project is expected to be 250 2Q 2011 3Q 2011 completed by 3Q 2013. Another commercial 200 project “kalpataru Synergy-2” was launched 150 INR Per Sq ft Per Month VACANCY by kalpataru Developers in kalina. The project 100 will add about 0.2 million sq ft to the city’s 50 ABsORpTION grade ‘A’ office space by 4Q 2012. 0 Goregaon / JvLR CBD Andheri East BkC Lower Parel Malad Navi Mumbai Powai Worli/Prabhdevi kalina Thane / LBS Andheri East (IT) Lower Parel (IT) Malad (IT) Navi Mumbai (IT) Powai (IT) Thane / LBS (IT) Goregaon / JvLR (IT) CONsTRuCTION • Rentals for grade ‘A’ office space remained RENTAl VAluE stable during the quarter in almost all the micro markets across Mumbai. Downward Grade A Grade B pressure on rentals was witnessed in the SBD and PBD locations as demand for corporate leasing was impacted because of a slowdown in the economy. Companies consolidating their GRADE ‘A’ AVERAGE RENTAl VAluE pRIME OffICE spACE RENTAl TREND operations are looking for discounted deals. Availability of a large vacant stock provide an 520 265 forecast opportunity to the companies to negotiate on 470 rentals. 420 215 370 320 270 165 • Due to the increasing cost of debt, some 220INR per Sq ft per Month INR per Sq ft per Month few over-leveraged developers have started 170 120 115 looking for options to raise funds by liquidify 70 20 liquidate their land banks and selling stakes 2Q2008 4Q2008 2Q2009 4Q2009 3Q2008 3Q2009 65 2Q2010 4Q2010 1Q2008 1Q2009 3Q2010 1Q2010 2Q2011 3Q2011 1Q2011 in existing projects; HDIL has put nearly 5 CBD Andheri East Malad BkC 15 million sq ft of land on sale at virar. Similarly, 2Q2008 4Q2008 2Q2009 4Q2009 3Q2008 3Q2009 Lower Parel Navi Mumbai Powai Worli / 2Q2010 4Q2010 1Q2008 1Q2009 2Q2012 3Q2010 3Q2012 1Q2010 2Q2011 1Q2012 4Q2011 3Q2011 1Q2011 Prabhadevi DLf was also reportedly looking for a buyer Goregaon / JvLR kalina Thane / LBS for its 17-acre Mumbai textile mill at Lower Parel this quarter. MARKET TRANsACTIONs CLIENT BuILDING NAME AREA LoCATIoN TRANSACTIoN TyPE (SQ. fT.) Bajaj finServ Limited The Capital 74,000 BkC Sale Dhanlaxmi Bank Chintamani Avenue 31,000 Goregoan Lease firstRand Bank first India financial Center 35,000 BkC Lease The Executive Centre The Capital 20,000 BkC Lease Source: Colliers International India Research COllIERs INTERNATIONAl | p. 3
THE KNOWLEDGE REPORT | 3Q 2011 | Office | DeLhi DElhI supplY IN pRIME AREAs • Approximately 1 million sq ft of grade ‘A’ office space was available for lease in Delhi Nehru Place 10% in 3Q 2011. Most of this available supply was Connaught Place 2% concentrated in Jasola and Saket. Saket 29% • This quarter no new supply was added in the city’s grade ‘A’ inventory. A small commercial building measuring approximately 0.12 million sq. ft. developed by Ambience Group is Jasola 59% expected to be ready by 1Q 2012. • Rental values for grade ‘A’ properties increased in the range of 2 to 5 percent in location such as Connaught Place and Saket,DELHI however rental values have seen marginal 3Q 2011 GRADE ‘A’ AND GRADE’B’ corrections in Nehru Place and Jasola. RENTAl VAluEsCITY OffICE BAROMETER • A number of small area leases have taken place 400 in Delhi this quarter. A trend of setting a small 350 2Q 2011 3Q 2011 corporate office in Delhi and consolidation of 300 250 all other activities in peripheral locations is INR per Sq ft per Month 200 VACANCY getting popular among large corporate. This 150 shift in trend was primarily attributed to the 100 ABsORpTION fact that peripheral business district such 50 CONsTRuCTION as Gurgaon and Noida offer state-of-an-art 0 Jasola Nehru Place Connaught Place Netaji Subhash place Saket buildings at much lower rentals than Delhi RENTAl VAluE due to plenty of available stock. Grade A Grade B • In its effort to improve the infrastructure, of the Delhi Government’s Public Works Department has plans to construct two more bridges GRADE ‘A’ AVERAGE RENTAl VAluE across the yamuna in North-East Delhi and pRIME OffICE spACE RENTAl TREND from Shalimar Bagh to Azadpur in North- 280 West Delhi. Moreover, PWD will construct 500 260 forecast three flyovers — at Aurobindo Marg, Mehrauli- 450 240 Mahipalpur Road and Mehrauli-Badarpur Road 400 350 to further decongest the traffic at south DelhiINR per Sq ft per Month 220 300 INR per Sq ft per Month 200 locations. 250 180 200 150 160 100 140 50 120 0 1Q2008 2Q2008 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 4Q2009 1Q2010 2Q2010 3Q2010 4Q2010 1Q2011 2Q2011 3Q2011 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 4Q2009 1Q2010 2Q2010 3Q2010 4Q2010 1Q2011 2Q2011 3Q2011 4Q2011 1Q2012 1Q2012 3Q2012 2Q2008 Nehru Place Jasola Cannaught Saket place Netaji Subhash MARKET TRANsACTIONs CLIENT BuILDING NAME AREA LoCATIoN TRANSACTIoN TyPE (SQ. fT.) Alcon India Southern Park 10,000 Saket Lease Augusta Westland Statesman House 5,850 Barakhamba Road Lease Bell Helicopters The Grand 10,000 New Delhi Lease Safron Inner Circle 10,000 CP Lease Source: Colliers International India Researchp. 4 | COllIERs INTERNATIONAl