Track2Realty:

Prominent main streets of Delhi NCR like Connaught Place and Greater Kailash I, M Block markets witnessed expansion and entry of prominent international brands leading to a stable to upward rental trend in the rental values.

Due to healthy demand in Connaught Place, a sharp rise of 12% was witnessed over the previous quarter. The values in other markets remained stable with an upward bias owing to limited main street space availability.

Steady demand and expected churn is likely to push up the mall rentals in South Delhi and Gurgaon and main street rentals in Connaught Place (Inner Circle), South Extension I & II.

Driven by the interest from luxury retailers there were some significant few transactions in malls. Select quality malls in South Delhi and Noida witnessed rental appreciation.

Dearth of quality mall space and high demand caused a 10% q-o-q appreciation in Noida’s mall. South Delhi Mall space also registered a growth of approximately 2% in the same period owing to lease expirations and consequent churn in mall destinations.

Overall vacancy levels in malls dipped to 15.8% on account sustained leasing action in both main streets and malls. However, NCR was the only city to witness a marginal rise in mall vacancy level of about 1% over the quarter owing to increased in availability primarily in malls located in the peripheral locations. There was a deferment of approximately 500,000 sf of mall space in Delhi NCR now expected to be seen entering the market in the next few months.

Jaideep Wahi, Director, Retail Agency, Cushman & Wakefield India said, “Foray of international brands into premium malls and main streets is a trend that is here to stay in the Delhi NCR region. Superior quality retail options with ample visibility and considerable frontage in malls and main streets alike will see strong transaction activity. This will be responsible for escalating rentals in both main streets and malls. Transaction activity in niche segments like luxury and jewellery will gather further momentum. Food & Beverages segment is another segment to watch out for; organic growth is likely to happen not only in prime, but also upcoming locations.”

Nationally, there was only one mall of 1 million sq. ft. that got operational in Chennai while nationwide vacancy in mall spaces improved marginally by 1% over the last quarter. Activities were mostly concentrated on mall spaces rather than main streets due to non availability of quality space in the main streets.

This quarter witnessed the deferment of 5 malls amounting up to nearly 1.73 million sq. ft. with Chennai witnessing the deferment of 2 malls amounting to 530,000 sf.  While Pune witnessed the deferment of 1 mall of 700,000 sf mall space, NCR and Bengaluru witnessed the deferment of 1 mall each of 500,000 sf.

                                                                                          Source: Cushman & Wakefield

RETAIL RENTAL MOVEMENT IN DELHI NCR Q1 2013 (QUARTER ENDING MARCH 2013)

                                                                                          Source: Cushman & Wakefield

]]> http://www.track2realty.com/connaught-place-main-street-rentals-increase-by-12-noidsas-mall-rise-10-cushman-wakefield/feed/ 0 http://www.track2realty.com/supply-of-distressed-commercial-properties-expected-to-increase-during-the-second-quarter-of-2013/ http://www.track2realty.com/supply-of-distressed-commercial-properties-expected-to-increase-during-the-second-quarter-of-2013/#comments Tue, 07 May 2013 09:05:20 +0000 Track2Realty http://www.track2realty.com/?p=8524 Track2Realty: Though the opening of the Indian retail sector to foreign direct investments may have brought cheers to the commercial real estate sector in the country, it is expected that the supply of distressed properties within the commercial segment will increase during the second quarter of 2013, according to the RICS India Commercial Property Survey Q1 2013.

The marked pick up in the activity around distressed properties in the first quarter and the subsequent hike in their supply in the second quarter could prove to be a dampener on the extent of gains in capital values going forward. Even so, capital values expectations recorded their third consecutive quarter of positive readings, which is best run since early 2011.

Problems such as lower sales, cash flow crunch, expensive loans, high cost of labour and inflation are putting builders into a situation where they are forced to go for a better selling asset. Thus we see such examples, where developers are either reformatting their commercial project into a residential project or are looking for an exit.

Commenting on the trend, Sachin Sandhir, Managing Director, RICS South Asia said, “From the occupier’s point of view, commercial spaces often involve more capital. As there is huge demand for housing, small affordable to mid-income residential apartment projects sell faster than a commercial project.” Even investors— considered a good source of funds for developers– now prefer residential over commercial.

On the occupier side, it appears that the slowdown in economic growth over the past year is still taking its toll on occupier demand, although the economy is expected to tick up over the remaining part of the year 2013. However, in comparison to the last quarter, the occupier demand rose modestly in the first three months of 2013.

Commenting on the findings of the report, Simon Rubinsohn, Chief Economist of RICS said, “Developers within the commercial space are facing problems of funding. Meanwhile, India has not been able to attract a lot of foreign investments in comparison to other countries such as China and Malaysia within the region. Ongoing issues such as high inflation, large budget deficit and the slow pace of regulatory reforms are weighing down on business sentiment.”

The survey does note that investment enquiries increased modestly in the first quarter of the year compared to the previous quarter. “It is expected that the investment scenario will improve as the year progresses with the benefits of the recent regulatory announcements beginning to be felt,” he added.

On the supply side, inventory continued to rise but at a slower pace than the previous quarter. As a result the gap between the change in demand-supply recorded during the first quarter of this year (Jan-Mar) has further narrowed to the levels of the second quarter 2011.

]]> http://www.track2realty.com/supply-of-distressed-commercial-properties-expected-to-increase-during-the-second-quarter-of-2013/feed/ 0 http://www.track2realty.com/emerging-financial-capital-of-india-attracting-office-occupiers-i/ http://www.track2realty.com/emerging-financial-capital-of-india-attracting-office-occupiers-i/#comments Sun, 24 Mar 2013 12:45:26 +0000 Track2Realty http://www.track2realty.com/?p=8232 By: Ravi Sinha

Track2Realty Exclusive: It has been whispered in the real estate circle for quite some time, something that made the Delhi-NCR developers of office space smiling and their Mumbai counterparts worried. Amidst these MNCs and corporate looking forward to set-up their offices in India were wondering whether to go with the conventional wisdom of opting for the financial market of India or innovate with the new emerging financial centres in Delhi-NCR in general and Gurgaon in particular. Now the latest report of Knight Frank India has put to rest the speculation.

NCR is the biggest market in the country with nearly 88 mn.sq.ft. of office space under operation. Vacancy levels range between 20-25% across various micro-markets in the NCR. Most of the office supply has come up in the peripheral business districts of Gurgaon, Noida, Greater Noida and secondary business districts of Saket and Jasola.

The NCR is expected to witness new office space completions to the tune of 45 mn.sq.ft. in the coming three years. PBD-Gurgaon is one of the most sought after destination in the NCR, contributing nearly 43% of this supply. Noida Expressway in particular witnessed a lot of activity both in terms of new office supply and absorption in 2012.

Good connectivity, planned infrastructure and ample affordable housing options for employees are some of the key contributing factors to the growing commercial developments in this location. The proposed metro rail connecting Noida with Greater Noida will further enhance the connectivity of the sectors on the expressway and Greater Noida.

Even though sentiments remain cautious in the wake of the global economic scenario, we expect some green shoots of recovery considering the consolidation of domestic economic fundamentals and initiation of reforms. NCR is expected to witness steady absorption levels in the coming quarters

However, Mudassir Zaidi, Regional Director, North for Knight Frank India believes the trend has to be understood with the demand & supply dynamics of the given market.

In Delhi, due to limited supply vacancy is less and then space is not limited in the CBDs and hence PBDs are the traction point. He, however, does not find many takers for the virtual office here, thereby another reason of demand for office space.

“The need of the business as of now is physical space and we are sometime away from the reality of virtual offices. It all depends on the nature of the business, and in the given demand-supply dynamics, office space is in demand at the moment,” says Zaidi.

…..to be continued 

Track2Realty Exclusive: Analysis of South Zone (Bangalore)

Retail leasing activity in Bangalore remained active through 2012 due to the opening of a few malls particularly in the Whitefield micro-market. Apart from the stable leasing activity seen through the year, space enquiries from retailers during the period point to the fact that a number of them remained bullish on their medium to long term prospects due to the increasing affluence of the growing middle class.

With limited vacancy in operational malls and most of the space in the newly operational mall in the city having been pre-leased, the overall vacancy in the city stood at 2.7% at the end of Q3, much lower than the national average.

Recently, the clearing the decks for multi brand international retailers to enter Indian markets, with the relaxation of retail FDI policy by central government has provided a major boost to both retailers and developers. However, the final decision to implement the policy has been left on respective state governments.

As a result, though the overall sentiment in Mumbai and Delhi has improved owing to respective state governments adopting the new policy, however, with state of Karnataka opposed to entry of MNCs in multi brand retail, Bengaluru’s retail sector is unlikely to witness any immediate impact from this.

However, retail rental values are expected to firm up steadily over the next one year, in tandem with the expected pick-up in economic growth rates.

Best performing micro markets:

-          Organised retail space in select projects in central, suburban continue to be amongst the best performing retail markets in the country. Meanwhile several malls in peripheral locations have also doing with the development of catchments in their vicinity, particularly in Whitefield and on Bannerghatta Road.

….to be continued

Track2Realty Exclusive: Analysis of West Zone (Mumbai)

The retail landscape across the western zone of the country has remained active through 2012. The sector performance was characterized by buoyant leasing activity from both Indian and international brands. As a result, in addition to expansion of Indian brands, many international retailers also set up their new outlets in the city. Moreover, the recent policy reforms, allowing FDI in multi-brand retail has improved overall sentiments in the sector.

Additionally, the restrained mall supply, particularly in Mumbai, resulted in moderation in availability levels of mall space in the city. As a result, mall rental values across a few micro markets witnessed an appreciation in 2012. Similarly, the continued preference of retailers towards established retail hubs resulted in high street rental values.

Best performing micro markets:

-          Mumbai: Suburban markets of Goregaon and Malad continue to be amongst the best performing retail markets in the city.  This can be attributed to availability of significant mid range and high end residential catchment areas in vicinity.

Major Transactions:

Source: Market Intelligence, DTZ Research

Emerging Markets:  Eastern Suburbs – Kurla.

Developments expected: The new mall development activity in Mumbai is fairly restrained. About a million sq ft of mall space is expected to get operational over the next 6 to nine months.

….to be continued

Track2Realty Exclusive: Analysis of North zone (Delhi NCR)

Owing to sluggish global and domestic economic growth, high inflation and steep depreciation in rupee value, market sentiment remained subdued during the first three quarters of 2012. International brands are still positive about the Indian growth story.

However, most of these brands have witnessed a slowdown due to high prices. Medium to high class foreign brands are also concentrating on making prices more competitive to ensure footfalls. The leasing activity, though much less in quantum, was spread across malls and high streets.

Owing to high vacancy levels and retailers going slow on expansion plans, Delhi NCR witnessed high mall supply deferment resulting in no new supply in the first three quarters of the year. As a result of continued rollover of projects to subsequent quarters, no new supply is expected by the end of the year as well.

With no new supply and modest take-up, the vacancy levels remained high in double digits. Enquiries and take-up activity were focused around the established malls with high footfalls while less popular malls continued to struggle to attract occupiers. These malls continue to register high vacancy levels. Retailers want to open stores only in high quality spaces.

Owing to subdued demand coupled with high vacancy levels, mall rental values remained largely stable across the city. The change in the FDI regime will propel the sector back on the growth track by raising the demand for organised retail space further. Most of the major developers in the country who had shifted their focus to residential are back to drawing up big retail plans. The sector is expected to witness heightened activity in the coming times.

Best performing micro markets:

-          Organised retail space in Saket, Vasant Kunj in Delhi, MG Road in Gurgaon and Sector 18 in Noida continue to be amongst the best performing retail markets in the city. This can be attributed to availability of significant mid range and high end residential catchment areas in vicinity. High Streets such as Khan Market and Connaught Place continued to be the most sought after locations due to their established popularity.

 Low performing markets:

-          Malls on Sohna Road in Gurgaon continue to struggle to get enough footfalls and are more than 50% vacant.

Major Transactions:

Source: Market Intelligence, DTZ Research

Emerging Markets: Greater Noida

Developments expected: The new mall development activity in Delhi NCR is fairly restrained. About 3 million sq ft of mall space is expected to come on stream in 2013.

……to be continued

According to latest operational update, the company has sold 18.64 million sq ft of area during April-February period this fiscal against 20.20 million sq ft in the corresponding period of previous year.

In value terms, sales bookings fell to Rs 2,361 crore from Rs 2,389 crore during the period under review even though the realisation per sq ft has improved.

Uttar Pradesh contributed maximum to the sales bookings in terms of volume as well as value. The company sold 15.21 million sq ft of area worth Rs 1,874 crore in the state during April-February period of 2012-13 fiscal.

Ansal API is developing two large townships in UP – Sushant Golf City at Lucknow spread over 3530 acre and Sushant Megapolis at Greater Noida spread over 2,504 acre.

The cumulative collection during April-February period of this fiscal stood at Rs 1,764 crore excluding proceeds from the sale of two assets.

Ansal has offloaded 50 per cent of its commercial project ‘The Campus’ at Greater Noida for Rs 78 crore, of which Rs 15 crore has been collected. It has also exited from Bhatinda township for Rs 35 crore and has so far collected Rs 31 crore, according to the operational update.

Meanwhile, Ansal API had reported consolidated profit of Rs 15.85 crore in the third quarter of this fiscal against a net loss of Rs 21.01 crore in the year-ago period.

The consolidated total income rose by 23 per cent to Rs 277.66 crore during October-December quarter against Rs 226.18 crore from the corresponding period of previous year.

The company’s net debt declined to Rs 1,110.29 crore as on December 31 2012 from Rs 1,208.77 crore at the end of the previous fiscal.

Track2Realty Exclusive: Analysis of East Zone

The transaction activity registered in Kolkata in 2012 was down by 42% during Q1-Q3 2012 compared to the year ago period. The subdued demand is the result of the uncertainty prevailing in both the global as well as domestic markets. Most of the corporates have trimmed their expansion plans and instead looking at consolidation to optimize their real estate usage and bring down the costs.

With respect to the primary sectors driving the office space demand, IT/ITES continued to be the primary driver followed by professional services and manufacturing.

Due to the moderation in demand and tough economic environment resulting in liquidity crunch at the developers end, the new supply dropped sharply in Kolkata. It dropped by 80% to approximately 0.5 million sq ft between January and September 2012 as compared to 2.3 million sq ft recorded in 2011 during the same period.

Rental values have remained stabled across most micro markets in Kolkata with the exception of Kolkata CBD where the rents increased by as much as 18% due to infusion of new supply in the area and sustained demand.  Due to the better quality of construction, the new buildings in Kolkata CBD are commanding higher rentals as compared to the old ones.

Best performing micro markets:

-          Kolkata: PBD locations continue to attract majority of office space demand. Out of Rajarhat and Saltlake, Rajarhat continues to be the preferred micro market due presence of IT/ITES SEZs offering high quality infrastructure at competitive rentals.

Kolkata:

Source: Market Intelligence, DTZ Research

 Development pipeline 2013, major projects: 

Source: Market Intelligence, DTZ Research

……to be continued

Track2Realty Exclusive: Analysis of South Zone

Bangalore is the only major metro in the country which saw a year-on-year increase in take-up of office space in 2012. The total take-up increased by 9% to 8.3 million sq ft in Q1-Q3 2012, from 7.7million sq ft in the year-ago period as a number of occupiers took-up space for their future requirement for consolidation and expansion.

However the take-up recorded a year-on-year decline in both Chennai and Hyderabad by 28% and 36% respectively in the wake of weak demand from both US and European companies. IT/ITES continues to account for majority of office space demand in south zone, followed by manufacturing, healthcare and consulting sectors.

 Best performing micro markets:

-          Bangalore: PBD ORR, Whitefield, Bannerghatta Road

-          Chennai: SBD, CBD, PBD OMR (Close to Taramani)

 -          Low performing markets:

-          Bangalore: Hosur Road, Electronic City

-          Chennai PBD OMR (farther stretches, close to Siruseri), Ambattur 

Source: Market Intelligence, DTZ Research

Emerging Markets: Bellary Road in Bangalore

 Development pipeline 2013, major projects: 

Source: DTZ Research

….to be continued

Track2Realty Exclusive: Moderation in new supply brought the vacancy down

During 2012, the new supply dropped by a whopping 40% y-o-y to 18 million sq ft, as across many cities, the slow adjustment of supply with the changing demand patterns took effect. Bangalore was the only exception to this, where the new supply rose by a whopping 35% y-o-y, as a number of developments which had been fast tracked in response to the sharp recovery in demand in the city since 2010, got completed during the period.

At the end of Q3 2012, the total vacant office space across the seven cities in the country stood at 80 million sq ft vis-a-vis 83 million sq ft at the beginning of the year.

In spite of the lower take-up, the rentals remained largely stable due to the progressively declining vacancy. The rentals increased only in select few sub-markets including Bangalore submarkets of PBD Outer Ring Road and PBD Whitefield  and Kolkata CBD, among others, due to sustained demand in these markets.

North zone

Delhi NCR witnessed a drop in the cumulative take-up levels between January and September 2012. In Delhi NCR, the first three quarters of 2012 witnessed a total take-up of 3.75 million sq ft which was approximately 11% lower when compared to the same period in 2011.

Due to the moderation in demand and tough economic environment resulting in liquidity crunch at the developers’ end, the new supply dropped sharply in Delhi NCR. In Delhi NCR, approximately 3.4 million sq ft came on stream in the first three quarters of 2012, a drop of 41% from the same period a year ago. Rental values have remained stable across most micro markets in Delhi NCR.

The initiatives taken by the government in the form of slew of policy reforms announced, is expected to lift the business sentiment which in turn would stimulate office space demand in next three to six months.

Best performing micro markets:

-          Delhi NCR: PBD locations continue to attract majority of office space demand. Out of Gurgaon and Noida, Gurgaon continues to be the preferred micro market due to its high quality infrastructure and proximity to international airport. Within Gurgaon, DLF Cyber City continues to be the most sought after location leading to decline in vacancy levels. In the past couple of years Sohna Road has emerged as the next go-to location due to high availability of quality space and competitive rentals.

Low performing markets:

-          Continued migration to peripheral locations resulted in low demand for SBD markets. The slowdown in demand from IT sector has impacted the performance of peripheral markets as compared to earlier years.  

Major Transactions:

Source: Market Intelligence, DTZ Research

Emerging Markets: Sohna Road in Gurgaon and Sec 127, 132, 135 and 144

Development pipeline 2013: There is a continuous re-alignment, though to a limited extent, of new supply to the changing demand factors and other macro-indicators. The delivery timelines of new projects continue to be revised. The latest development schedule indicates the following development pipeline for Delhi NCR:

Source: DTZ Research

 …..to be continued