india major report - bangalore - star that shines the brightest march 2016

7/26/2019 India Major Report - Bangalore - Star That Shines the Brightest March 2016

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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

25

06

16

28

08

24

30

CONTENTS


3/18

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


4/18

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.

CBRE Ltd. 2016 |54 | CBRE RESEARCH

BANGALORE THE STAR THAT SHINES THE BRIGHTEST | INDIA


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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)

CBRE Ltd. 20168 | CBRE RESEARCH |9

BANGALORE THE STAR THAT SHINES THE BRIGHTEST| INDIA


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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




8/18

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)


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%.




9/18

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


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


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




10/18

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


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


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


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


CBRE Ltd. 20166 | |17CBRE RESEARCH


11/18

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



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 %




Inmnsq.

ft.




12/18

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





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





Inmnsq.

ft.




13/18

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




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




Inmnsq.

ft.




14/18

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




15/18

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.




16/18

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


BANGALORE THE STAR THAT SHINES THE BRIGHTEST| INDIA


17/18

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



18/18

For more information about this regional major report, please contact:

RESEARCH

Abhinav JoshiHead of Research, India+91 124 [email protected]

Raghav KhileryAssistant Manager India Research+ 91 80 [email protected]

BUSINESS LINE

Ram ChandnaniMD Transaction Services, India+91 80 [email protected]

CBRE RESEARCH

This report was prepared by the CBRE India Research Team, which forms part of CBRE Researcha network of preeminent researchers who collaborate toprovide real estate market research and econometric forecasting to real estate investors and occupiers around the globe.

All materials presented in this report, unless specifically indicated otherwise, is under copyright and proprietary to CBRE. Information contained herein,

including projections, has been obtained from materials and sources believed to be reliable at the date of publication. While we do not doubt its accuracy, we

have not verified it and make no guarantee, warranty or representation about it. Readers are responsible for independently assessing the relevance, accuracy,

completeness and currency of the information of this publication. This report is presented for information purposes only exclusively for CBRE clients and

professionals, and is not to be used or considered as an offer or the solicitation of an offer to sell or buy or subscribe for securities or other financial instruments.

All rights to the material are reserved and none of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed

to any other party without prior express written permission of CBRE. Any unauthorized publication or redistribution of CBRE research reports is prohibited. CBRE

will not be liable for any loss, damage, cost or expense incurred or arising by reason of any person using or relying on information in this publication.

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india major report - bangalore - star that shines the brightest march 2016

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