Bengaluru (Bangalore) Office Market

Snapshot 2013

Bengaluru Oce Market Snapshot 2013

Highlights
Bengaluru office market was the largest contributor to the panIndia office space absorption with a share of approximately 27% of the total area leased in 2013. However, overall occupier demand in Bengaluru has softened in 2013 as against 2012. New requirements are mainly from corporates seeking to realign their office requirements via consolidation and relocation. New office construction commencements and office development completions have been very limited. The drop in demand has been matched by drop in new supply, thereby maintaining the demand supply gap in equilibrium.
3.5 3.0 2.5
IN MN SF 2.88 2.82 AVERAGE ABSORPTION 1.68 1.28

Quarter-on-Quarter Absorption

2.0 1.5 1.0 0.5 0.0 1Q 2Q 3Q

Demand
Absorption of office space in the Bengaluru market amounted to just over 8.66 MN SF in 2013, which is 9% and 23% down recorded in the year 2012 and 2011 respectively. In the first half of the year, Bengaluru witnessed robust demand from occupiers; However there was a drastic reduction in the number of transactions in the second half of the year. There were fewer large sized transactions in 2013 as compared to previous years. In 2013 the average space size of the deals was approximately 37,000 SF, which was half of that in 2012 as most of the demand was generated by small and mid-size enterprises looking for expansion. IT/ITeS remained the primary demand driver accounting for approximately 80% of the total office space absorption. The Outer Ring Road and Whitefield micro-markets remained the preferred office destination, together accounting for 55% of the total absorption.

4Q

Industry Wise Absorption

Others 15% Telecom 2%

2 Engineering 14%

IT/ITeS 79%

Top 10 Transactions of the Year

Client
Samsung Honeywell JDA Cerner Columbia Asia Hospital Amazon Adobe Accenture Symantec AXA Group

Building Name
Constellation Business Park RMZ Ecoworld Mantri Commercio Manyata Embassy Tech Park Independent Building Brigade WTC Prestige Platina Tech Park Prestige Technopolis RMZ Ecoworld Mfar Manyata Tech Park

Developer / Landlord
Bagmane Developer RMZ CORP Mantri Developer Embassy Group Sivasakthi Developer Brigade Group Prestige Group Prestige Group RMZ CORP

Area (In SF)

550,000 500,000 360,300 350,000 300,000 252,000 250,000 250,000 246,000 196,250

Location
Outer Ring Road Outer Ring Road Outer Ring Road Outer Ring Road Whitefield Malleshwaram West Outer Ring Road Dairy Circle Outer Ring Road Hebbal

Transaction Quarter
2Q 2Q 3Q 1Q 1Q 2Q 3Q 3Q 4Q 4Q

Mfar Construction

Bengaluru Office Market Snapshot 2013 | Colliers International

Supply & Vacancy

New office supply was close to 5.5 MN SF, which is 28% lesser than the new supply in 2012. Given that most of the demand was for Outer Ring Road and Whitefield, it comes as no surprise that 75% of the new supply was also located in these two micro-markets. The remainder of the new supply was evenly split between Hosur Road and Electronic City micromarkets. Due to the limited addition of new buildings, the overall market vacancy has reduced to 14% which is marginally lower than that of 2012 (15%).
12

New Supply, Absorption & Vacancy

18%

FORECAST
10 8 6 4

16% 14% 12% 10% 8% 6% 4% 2%

Rental & Capital Values

Rentals in CBD and Electronic City remained stable. In the preferred office destinations, Outer Ring Road, Whitefield and Banerghatta Road rental values appreciated by 6 - 10% on Y-o-Y basis. Going forward, rental values in the EPIP Zone, Whitefield and ORR are expected to witness an increase due to consistent occupiers interest especially from the IT/ITeS industry.

2 0

2010

2011

2012

2013

2014 F

2015 F

New Supply (In MN SF)

Absorption (In MN SF)

Vacancy (In %)

2014 Prognosis
It is anticipated that the annual transaction volumes in 2014 will be similar to 2013, albeit the second half of the year is expected to be stronger than the first half, as market activity after the general elections is expected to improve and be better than now. Development completions will continue to be below average as developers shall refrain from adding more speculative supply until the overall market improves. There are however a significant number of under construction projects in Whitefield, Outer Ring Road and towards the north Bengaluru. Overall, the prospects for office rentals increasing significantly is unlikely, barring micro-markets such as Outer Ring Road and CBD which are expected to witness modest rental increases in 2014. This could be due to a scarcity of quality office space. Rental values may be under a downward pressure in peripheral micro-markets like Electronic City and Whitefield due to higher supply ratio as compared to other micro-markets.
60 50 40 30 20 10 0

Average Rentals Trends & Forecast

FORECAST

2008

2009

2010

2011

2012

2013 2014 F

2015 F

Average Rental Trends (INR Per SF Per Month)

Bengaluru Office Market Snapshot 2013 | Colliers International

Primary Authors:

62 countries on 6 continents
United States: 140 Canada: 42 Latin America: 20 195 EMEA: 85

Surabhi Arora Associate Director | Research +91 124 456 7500 surabhi.arora@colliers.com Amit Oberoi National Director I Valuation & Advisory Services & Research Sachin Sharma Assistant Manager I Research For Oce Services: George McKay South Asia Director I Oce & Integrated Services george.mckay@colliers.com Vikas Kalia National Director I Oce Services vikas.kalia@colliers.com Yogesh Bheemaiah Director I Oce Services yogesh.bheemaiah@colliers.com Technopolis Building, 1st Floor, DLF Golf Course Road, Sector 54, Gurgaon - 122 002 TEL +91 124 456 7500

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billion in annual revenue

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billion square feet under management

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professionals

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