9.6 mn sq ft Grade A office space absorbed in Q3

Nearly 9.6 million sq ft Grade A office space was absorbed during the July-September quarter of this year, a report said.

According to a study of nine major metros by property consultant Colliers International, office absorption witnessed sustained momentum, with Grade A absorption totaling 9.6 million sq ft, making it 28.26 million sq ft so far in 2016.

“Although Q3 2016 marked a quarter-on-quarter decrease of 7.6 per cent in gross leasing volume, we expect leasing activity to pick up in the upcoming quarters,” it added.

As per the survey, southern cities dominated the office absorption pie with Bengaluru at the top (25 per cent), Hyderabad (20 per cent) and Chennai (11 per cent), followed by Gurugram (13 per cent), Mumbai and Noida (10 per cent), Pune (8 per cent), Delhi (2 per cent) and Kolkata (1 per cent).

“Vacancies are set to decline in prime commercial corridors on the back of rising demand momentum, especially in Bengaluru, Pune and Hyderabad,” Colliers International’s South Asia Director, Office and Integrated Services George McKay said.

He noted Bengaluru continues to go from strength to strength in terms of office absorption.

“This is good news for owners and developers, but is a challenge for office occupiers in many cases, as they face the prospect of higher rental rates and fewer options to choose from at least in terms of ready supply.

“Land markets in the main cities have become quite active as established and next generation developers are looking to replenish their land banks, to satisfy both existing and new client demand,” he said.

As per Colliers, the growing office demand will outstrip supply in technology sector driven markets such as Pune, Bengaluru, and Hyderabad.

“This should therefore lead to downward pressure on vacancies and an upward pressure on gross office rents in these markets. In contrast, traditional commercial markets such as Mumbai and NCR are likely to remain stable in terms of rents and vacancy due to a stable demand and supply scenario,” McKay said.

According to Surabhi Arora, Senior Associate Director, Research at Colliers International, the improving economic picture provides a favorable background for continued expansion in commercial property markets.

“Nasscom predicted 10-12 per cent annual growth in IT and technology enabled services until 2020 that should help the office market to remain strong in 2017.

“That said, a further impetus to growth should be provided by other macro-economic factors such as declining oil prices and increasing monetary easing facilitated by ongoing moderation in inflation,” she added.

Source: Realty.Economictimes.Indiatimes.Com

Turning your dreams into reality

Dwarka expressway is the new shining star in the realm of real estate and has brought about revolution in the sector. It is emerging as a paradise for residential and commercial property buyers.

It is no news that the real estate market in the areas surrounding Delhi – mainly Noida and Gurgaon – is flocked with apartments and villas from the best players in the market. However, areas such as Dwarka Expressway and South of Gurgaon are slowly coming on the radar, making them the next goldmines of real estate.

It is indeed true that real estate is one of the most preferred areas for investors in India. In the recent years, the attractiveness of real estate has further been augmented by the increasing demand for more and better quality housing, office space and commercial complexes. Dwarka Expressway and South of Gurgaon are two such destinations for real estate investors. Micro markets in Delhi and neighboring areas have emerged as destinations for future investments, which not only provide relative affordability but have also transformed majorly owing to infrastructural development and improving connectivity, with the potential to attract real estate demand across various segments.

The Expressway to Dreams:

Dwarka Expressway is the new shining star in the realm of real estate and has brought about a wave of revolution in the sector. It is emerging as a paradise for residential and commercial property buyers and has successfully lured investors with its many advantages. The new eight-lane expressway is expected to come as a relief for those who commute from Delhi to Gurgaon. The reason behind the growth of Dwarka Gurgaon Expressway is that the construction for many projects has already started in this region. Reputed builders such as Neo, Vatika Group, Raheja Builders, Chintels, etc, have their projects on Dwarka Expressway and have already gained a firm foothold in the area.

The housing projects along Dwarka Expressway are in various stages of construction – some almost complete, others are yet to add additional floors. Union Transport Minister Nitin Gadkari’s announcement in March to accord national highway status to Dwarka Expressway has given hope to thousands of home-buyers who have invested here and are awaiting the possession of their homes. Haryana Chief Minister Manohar Lal Khattar has fixed June 2017 as the final deadline for the road. If Dwarka Expressway gets highway status, completion of the expressway will be speeded up as it will be controlled by the National Highways Authority of India (NHAI).

Prashant Kaura, Founder and Executive Director, GenReal Property Advisers Private Limited, says that once certain stretches of the highway that have been held up due to land acquisition issues are developed and the highway is complete on the Haryana side, the market will see activity. Right now, the sales that are happening are being settled at sub Rs 6,000 per sq ft.

Projects to benefit most from the NH status will be the ones along Khirki Duala to Palam Vihar areas that include sectors 88, 89, 90, 102, 104 etc. Many developers are likely to time their completion and delivery with the completion of the expressway. They are the ones who are likely to witness an upward movement in prices (about seven-eight per cent). What this means is that if the expressway gets completed by next year, around 10,000 units will be up for delivery along the stretch.

The Address to The Future:

Following the present trend of affordable housing, about 11 builders have come together to fulfill the dreams of many. This upcoming destination is known as ‘South of Gurgaon’. Eleven developers of NCR, namely Supertech Limited, Ashiana Homes, Ashiana Housing, Central Park, Eldeco, ILD, CHD Developers, Silverglades, MKS Ventures, Gold Souk and Nimai Developers have put in a vision to together develop ‘South of Gurgaon’ as the hottest yet affordable real estate destination within the close proximity of Gurgaon.

“South of Gurgaon is witnessing a little more interest than Golf Course Road and Golf Course Extension because of its affordability and developed infrastructure. Sohna Road is already a developed state highway and is being further expanded into an eight-lane expressway. The master plan of the city has also opened up many new sectors for real estate development. The Southern Peripheral road which links the NH8 to Golf Course Road and South Delhi is already under construction. The region is well-connected to the existing offices and social infrastructure in Gurgaon,” says Navin M. Raheja, CMD, Raheja Developers.

“It offers a good example of mixed use development – a recipe for further growth and planned urbanisation. On either side of this road, presence of schools, IT parks, malls, residential apartments, villas and the new upcoming residential projects make it a sought after location,” Raheja said.

Raheja Group has a mega township in South of Gurgaon, Raheja Aranya – The Smart Green City, spread over an area of 170 acres with world-class features. The township offers a mix of commercial, retails spaces and host of facilities such as community center, shopping arcade, landscaped gardens and parks, schools and nursing homes. It is strategically located with the best view of the Aravalli ridges and is ecologically friendly with host of advanced green features such as rooftop solar power generation for the entire city, rainwater harvesting, solar street lighting, waste management system, recycled water for flushing and landscaping, construction using local materials to conserve environment. It has projects such as Aranya independent floors, plots and Maheshwara, which gives a perfect blend of city and scenic life.

“Apart from already developed infrastructure such as schools, colleges, hotels and hospitals and excellent connectivity from main Gurgaon, IGI Airport and Delhi, South of Gurgaon boasts of natural beauty being amidst the Aravali Hills. Development of housing projects which range from moderate apartments to luxurious high-rise apartments to lavishly designed villas makes Sohna, ‘South of Gurgaon’, as a popular sub-market in the entire NCR. The future of this region is bright as it has close proximity to the all major cities of Delhi NCR; the area is easily accessible and is strategically located (from commercial, residential and industrial view),” says Mohit Arora, Managing Director, Supertech Limited.

Supertech Group’s projects in South of Gurgaon include Hill Town and Officers’ Enclave. Hill Town is an integrated township of 140 acres which offers two and three bedroom three side open premium residences, lavish villas and independent floors. The township also has spaces for retail and commercial activities, school, hospital, community center, taxi stand, beauty parlor, ATM, kids’ play area and a 15000 sq. ft. clubhouse, which has a mini theater, gymnasium, badminton court, tennis and squash courts, yoga and meditation pavilions, library and party halls.

Located on the foothills of the Aravallis, Hill Town will render a stellar view of the hills. Officer’s Enclave, the affordable group housing project, is a part of 140 acre integrated township, Hill Town. It is a Special Housing Scheme for Serving and Retired Government Employees located in Sector-2, South of Gurgaon. The scheme will to cater to the housing demands of the government officials at below the market rates.

Source: Hindustan Times (Estates), May 21, 2016, Page 04

Office space deals up 8% in Q1 2016

The absorption of commercial real estate including outright purchases and leasing of office space in India’s top seven markets increased to 5.8 million square feet during the first quarter of 2016, up 8% from that a year ago, according to commercial data information and analytics firm Propstack.

This signals continuation of the strong revival seen last year due to renewed corporate confidence amid steady economic growth, which is an indicator of the economy’s health and augurs well for job creation.

The number of commercial real estate transactions by companies went up 23% during the quarter. The demand was led by companies in BFSI (banking, financial service and insurance), e-commerce and IT/ITeS sectors. Some of the significant deals concluded during the quarter include that of WNS in Mumbai, UBS at Pune, ADP in Hyderabad and Genpact in Gurgaon.

The office vacancy rates across the seven markets – Mumbai, Delhi-National Capital Region, Bengaluru, Pune, Chennai, Hyderabad and Kolkata – declined to 14% from 26% a year ago. Office space pickup was robust in the quarter ended March and vacancy levels also fell substantially, said Raja Seetharaman, director at Propstack.

“If the current momentum continues, 2016 could well be a record year for office space absorption in India. Commercial real estate is clearly reflecting the mood on business front and based on the pipeline for office space demand we are heading towards registering a strong year,” Seetharaman said.

The sector saw a turnaround in 2015 after witnessing a lull for over three years, recording about 35 million sq ft of office space purchases and leases in the country’s top eight property markets.

The figure was the highest since 2011, following sustained easing of rentals owing to global financial crisis. Most cities showed steady rental growth in the first quarter of this year, with the exception of Kolkata. While Pune led the pack in terms of rentals with an increase of 6.9%, Bengaluru was next with 5.7% while Delhi-NCR saw 2.8% growth and Chennai saw 2.6%. Mumbai saw a marginal increase of 1.2% while rentals in Hyderabad went up 1.4%.

Deals by both investors and occupiers suggest that sentiment is improving for the office property market.

Significantly, the 8% increase in absorption came without large deals of the sort seen last year. Transactions for office space of over 25,000 sq ft formed the major chunk of space absorption in Pune and Mumbai during the quarter. In Pune, such deals accounted for as much as 64% of the total absorption volume, while in Mumbai the share was 45%. In contrast, last year had seen a pickup in large transactions, led by Flipkart, which leased 2 million sq ft of a custom-built office campus in Bengaluru and Tata Consultancy Services, which rented over 2 million sq ft of built-to-suit space at Hiranandani Estate in Thane for 15 years.

Source: CredaiNCR.Org

FDI in e-commerce: demand for office space to go up

With the government announcing 100 per cent FDI in e-commerce category, office and warehousing space is likely to witness a spurt in activity. Industry watchers and developers note that ecommerce companies will fuel demand in top four metros besides cities like Pune and Hyderabad for its proximity to provide quality skilled professionals.

E-commerce and start-up firms had leased 4.3 million sq ft in 2015 compared to just 0.54 million sq ft in 2014, as per property consultancy CBRE.

“Around 10 per cent of the total office market demand is currently driven by e-commerce companies. This segment was not there till two years ago,” said Rajat Gupta, Managing Director – transaction services at CBRE South Asia.

Anuj Puri, Chairman & Country Head, JLL India, said, “India is already host to some of the largest global e-commerce players. The announcement that 100 per cent FDI will now be allowed in e-commerce is going to open the floodgates to a host of other players in this segment. The impact that this development will have on Indian real estate will be significant. In the first place, the new players – like their predecessors – will require large office spaces to house their back-end teams. They will naturally direct this requirement to the country’s top seven cities.”

Ashish Shah, COO, Radius Developer too echoed a similar sentiment. Shah points that there will be an upswing from top four metros and its peripheries.

“E-commerce players typical need two types of space – warehousing and other to house their vendors and software-led operations to complete fulfillment soon. We see a whole new gamut of companies coming in next 6-8 months.” In January this year, Amazon had taken close to 30,000 sq ft space in Radius’s commercial project in Mumbai.

Last year, Flipkart completed India’s single largest office space leasing deal, signing up for a 2 million sq ft custom built office campus in Bengaluru. Snapdeal.com had also relocated to 450,000 sq ft campus. Players like Ola, Peppery Fry and Jabong too were among key space occupiers. A CBRE report also noted that demand for warehousing space rose by nearly 40 per cent during last year to an all-time high of about 10 million sq ft driven by demand from logistics, FMCG, e-commerce and engineering & manufacturing firms.

According to the report, Delhi-NCR and Mumbai witnessed bulk of the leasing activity and constituted close to 50 per cent of the total space absorption in 2015. Logistics and e-Commerce players remained the dominant drivers of demand in these two micro-markets. Bangalore and Chennai were among the other leading cities that were on the radar of warehousing space occupiers during the year.

Developers like Lodha, Hiranadani, Radius are also putting their focus back on commercial properties as the rental yield is much higher such projects.

Source: CredaiNCR.Org

Office retail complexes attract eyeballs

Retailers feel this format offers them a bigger bang for their buck in the absence of quality retail space.

While retailers have identified the Office Retail Complex (ORC) format as a good alternative, they are more than ever, willing to look at this format with much more interest in the absence of quality retail space. ORCs offer a higher bang for their buck with comparatively lower rents despite being offered prime ground floor spaces in comparison to premium malls and with weekday footfalls as well as viewership guaranteed to be higher than comparable malls.

With the added benefit of nearby residential nodes, such ORCs at their optimum have the potential to operate as standalone retail malls in respect of the lower floors and generate similar footfalls and business incomes for retailers.

This format also offers institutional investors a potentially higher revenue across a diversified tenant base while providing them the key differentiator which may be the ultimate weapon in commercial occupier retention and future rental upside potential.

Here’s a look at the how this format is shaping up in the tier-I cities.

Delhi-NCR ends up throwing totally different results. While this geography outstrips all others in terms of size of the ORC retail format, the tenant mix is also quite at variance.

The dominant category here comprises of others, which is a heterogeneous mix of groceries, medical stores, property brokers, laundry, courier services, jewellery stores, printing services and stationary outlets.

BFSI makes up for the next highest tenant presence, closely followed by F&B. The remaining categories remain peripheral players who take up space based on the potential value they can derive from their store locations.

It is interesting to note that most of such formats and consequently stores are located in destinations which are well established office corridors.

Even in Gurgaon, the NH-8 and MG Road office corridors are significant contributors, while in the SBD, office corridors such as Jasola, Nehru Place and Saket are the major contributors.

Mumbai is one of the prime tier-I office markets where ORCs are visible across modern office pockets of BandraKurla Complex (BKC), Andheri East, Powai and Navi Mumbai. Hiranandani Powai ORC has the highest rental premium of over 3X, possibly on the back of its added benefit of being an elite neighborhood residential development.

While the old CBD (Nariman Point) does have a few retail outlets to talk about, it may not feature high on the list of retailers as buildings are of old design and may not offer amenities such as ample parking space, large display area, etc.

Also, Mumbai’s CBD area is already proliferated by local food and beverages or F&B outlets and high streets, thereby making the ORC concept somewhat redundant. As a result, retail rents fetch a higher premium over office rents in modern office locations compared to the CBD.

F&B is the most dominant category, as it accounts for 46% of the total retail categories’ presence. Noticeably, this category has adapted to the culture that different ORCs have to offer.

For instance, at BKC, expensive fine dining restaurants have made maximum inroads while at Andheri East, most F&B outlets cater to the moderately- priced fine dining categories. Banks (16%) and electronics-mobile-telecom (12%) are the next big categories across Mumbai’s ORCs.

The Bangalore office market is predominantly driven by IT/ ITeS occupiers largely confined to huge campus developments. These IT developments only offer the opportunity for a captive audience for retailers, though such numbers may also be quite high as IT firms in Bangalore typically occupy entire towers/ wings of larger office developments.

The commercial developments in Bangalore are largely in the city center and surrounding areas. The city center is itself a prominent retail hub and in such a scenario taking-up space in commercial office buildings in the vicinity makes perfect business sense for retailers as they not only cater to the shoppers but also make huge rental savings by opting for ORC formats over the high streets.

The proximity to the city center is reflective in the tenant mix of ORCs in Bangalore. While generally, fashion does not figure prominently in the retailers who occupy such formats, in Bangalore, it is visible in the fashion category dominating. ORCs in Bangalore are a part of the shopping center of the city than creating a standalone office district. F&B follows a close second as this category has maximum traction with shoppers and office goers alike.

Given the lack of quality retail space across the top-3 Indian cities, ORCs would definitely see good traction at a time when many domestic and inter national retailers have made plans for expansion. The author is chairman and country head at JLL India.

Source: Hindustan Times (Estates), Mar 19, 2016, Page 05