MARKETBEAT

OFFICE SNAPSHOT
BANGALORE, INDIA
A Cushman & Wakefield Research Publication

Q1 2012

Preliminary estimates by the Central Government suggest that Indias GDP growth rate will be 6.9% for fiscal year 2011- 2012, compared to 8.4% in 20102011. The slowdown in the GDP growth rate was mainly due to the effects of the global economic uncertainty including the concerns on fiscal sustainability in Europe, coupled with poor performance of the agricultural and manufacturing sectors in the local economy. However, the Government has committed itself to predict a GDP growth of 7.6% (+/- 0.25%) in the coming fiscal year (2012-2013). There has been an improved flow of foreign direct investments in the preceding months of 2012, perhaps an indication of the year ahead. Predictions of a better economic environment in the U.S. and the Euro zone are expected to impact the Indian markets favorably. IT/ITeS and domestic BFSI majors in the country have already indicated plans to grow, thereby indicating a strong demand for office space during the year.

ECONOMY

Notwithstanding the high availability in Grade A developments in Whitefield, sizeable absorptions in Grade B developments were primarily due to better value propositions of available and fullyfurnished space in these developments. The suburban markets dominated the quantum of deals for Grade B developments. Quite a few corporates were also observed to vacate their existing premises and consolidate their operations in other developments or incubation spaces.

OUTLOOK
Approximately 11 msf of new supply is expected by the end of 2012. Absorption levels will remain on the higher side as significant lease transactions are expected to be closed during the forthcoming quarters. By the end of 2012, vacancy too is expected to come down marginally and suburban markets will continue to witness absorptions in Grade B developments.

STATS ON THE GO
1Q12 Overall Vacancy Grade A CBD Rents Absorption (sf) 13.2% 100 2,450,194 Q-O-Q CHANGE 11.8% 17.6% -635,432 Y-O-Y CHANGE -9.2% 22.0% 17.3% 12 MONTH OUTLOOK

HIGH LEVEL OF PRE-COMMITMENTS

Bangalores commercial office market was characterized by buoyant performance in the first quarter of 2012 with demand approximately at 5.24 million square feet (msf). Pre-commitments constituted almost 55% of the total demand with lease commitments for space in the range of 0.25 msf to 1.6 msf. The IT/ITeS sector was the prime absorber. Interestingly, small and medium enterprises accounted for quite a few significant deals in the range of 40,000 square feet (sf) to 90,000 sf. Peripheral markets of Whitefield and Electronics City recorded the highest absorption on account of availability in Grade A space at comparatively reasonable rentals. The absorbed space ranged between10,000 sf to 40,000 sf of floor-space area. About 32% of the total absorption was recorded in Grade B developments. On account of persistent demand, an escalation in the rentals was observed in the CBD/off-CBD and suburban micro markets.

ECONOMIC INDICATORS
INDIA GDP Growth CPI Growth Industrial Production WPI Growth
SOURCE: RBI & Central Statistics Office, India *Q-O-Q Change ** Y-O-Y Change, Dec 2011

2011 6.9% 7.7%* 4.4** 6.9%*

2012F 7.6%** 8.2%* 5.8** 6.3%**

2013F 8.6% 7.0% 4-5% 6.0%

CONTINUED ABSORPTION IN GRADE B SPACES

GRADE A CBD RENTAL VS. VACANCY RATES

120
INR/sq.ft/mth

Supply infusion during the quarter was recorded at approximately 1.27 msf of which approximately 350,000 sf was in the SEZs. Most of the new supply was delivered in the latter part of the quarter; as a result of which, 84% of the new supply remained vacant. This led to a marginal increase in the vacancy level in the city to about 13.2% in the first quarter of 2012 as compared to 12.0% in the fourth quarter of 2011. Vacancy in SEZ developments also witnessed a rise to about 4.4% on account of new supply not taken up.

25%

100

20% 15%
10% 5%

80 60
40 20

0 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12

0%

Grade A CBD rent

Vacancy

BANGALORE MARKET STATISTICS

SUBMARKET INVENTORY OVERALL VACANCY RATE UNDER CONSTRUCTION YTD CONSTRUCTION COMPLETIONS 27,936 112,029 0 678,648 YTD ABSORPTION GRADE A AVERAGE NET RENT (INR/SF/MTH) 4Q11* 85 58 48 30 1Q12* 100 65 48 30 US$ SF/YR 1Q12* $23.41 $15.21 $11.23 $7.02 EURO SF/YR 1Q12* 17.65 11.48 8.47 5.30

CBD/Off-CBD Suburban Peripheral -ITPB Peripheral Whitefield & Electronics City Peripheral Outer Ring Road (Sarjapur-Hebbal) TOTALS
** GRADE A CBD Rentals

7,904,929 23,300,394 3,535,763 25,872,525

13.3% 7.4% 3.7% 25.2%

160,927 92,000 0 2,705,000

137,115 563,537 0 1,188,074

21,342,961

6.7%

8,393,164

455,396

561,468

49

49

$11.47

8.65

81,956,572

13.2%

1,1351,091

1,274,009

2,450,194

85**

100**

$23.41**

17.65**

* REFLECTS ASKING RENTALS All rentals are quoted for Warm Shell, which includes core facility, high -side air-conditioning and 100% power backup Conversion Rate: US$1= INR 51.27 and Euro 1 = INR 67.97 CBD/Off-CBD micro market includes M.G. Road, Millers Road, Vittal Mallya Road, Residency Road, etc. Suburban locations include CV Raman Nagar, Koramangala, Bannerghatta Road, etc.

MARKET HIGHLIGHTS
SIGNIFICANT 1Q12 LEASE TRANSACTIONS BUILDING Gopalan Millennium Tower JP IT Park Umiya Business Bay SIGNIFICANT 1Q12 SALE TRANSACTIONS BUILDING NA MARKET NA BUYER NA PURCHASE PRICE (US$) NA SQUARE FEET NA MARKET Whitefield Electronics City Outer Ring Road (SarjapurHebbal) TENANT Atos Origin India Tejas Networks Ericsson BUILDING CLASS A A A SQUARE FEET 125,000 90,000 22,500

SIGNIFICANT 1Q12 CONSTRUCTION COMPLETIONS BUILDING Manyata Embassy Business Park JP IT Park MARKET Outer Ring Road (SarjapurHebbal) Electronics City TENANT NA Tejas Networks SQUARE FEET 455,396 250,000 COMPLETION DATE 1Q12 1Q12

SIGNIFICANT 1Q12 PROJECTS UNDER CONSTRUCTION BUILDING Manyata Embassy Business Park Bagmane Constellation MARKET Outer Ring Road (SarjapurHebbal) Outer Ring Road (SarjapurHebbal) TENANT NA NA SQUARE FEET 703,377 400,000 COMPLETION DATE 4Q12 4Q12

* RENEWAL - NOT INCLUDED IN LEASING ACTIVITY STATISTICS

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