Micro-market study of borivali dahisar - mira road

PAN INDIA COMMERCIAL OFFICE MARKET ANALYSIS Presented to: L&TAPRIL,20131Contents22Delhi NCRCOMMERCIAL OFFICE MARKET3zones4Business District ClassificationMicro-markets

CBD - DelhiConnaught Place, Barakhamba Road, Kasturba Gandhi MargSBD-DelhiNehru Place, Saket, Jasola, Bikaji Cama PlacePBD - GurgaonDLF Cybercity, MG Road, Golf Course Road, Sohna Road, Dundahera, Manesar, NH-8, Udyog ViharPBD - NoidaSector 16, 18, 62, 63, Greater Noida ExpresswayPBD - Greater NoidaSector Alpha, Beta, Gamma, Tech Zone5Distribution of Office stockThe NCR market has approximately 109.9 mn office stock. The trend of increasing office spaces the PBD of NCR (currently 78% of space in PBDs) due to Large office spaces and SEZs at competitive rental ratesThe Gurgaon micro market has approximately 57.5 mn stock which contributes 52% of the market. This is mainly due to the fact that High prices in CBD, low vacancy levels, limited stock and Grade B/ C developmentsDistribution of Office Space in NCRgross occupied stock6Distribution of Gross Occupied Stock by Micro-marketsGurgaon and NOIDA have observed consistent growth in occupancy of the commercial stock (~8% CAGR)The Greater NOIDA has observed a sudden growth in the recent past (31%)During the last 5 years approximately 22.8 mn sft of the office space has been absorbed. Annual commercial supply7During the last 5 years approximately 39.6 mn sft of commercial space had been added.It is estimated that ~44.7 mn sft would be added in next 5 years (~ 0.89 mn per annum average)Annual SupplyAnnual absorption8During the last 5 years ~ 28.6 mn sft of commercial space has been absorbed~72% of the cumulative year on year supply had been absorbed during this period

Annual AbsorptionAbsorption by Micro-markets9The average absorptions of Gurgaon and NOIDA Commercial Micro markets are higher than the average of the Region. Greater NOIDA has observed the growth since last three years only (~0.47 mn sft in three years)Annual Absorption in Micro MarketsVacancy Trends10Vacancy TrendsIn the last two years the vacancy rates in Delhi has increased from 17% (2010) to 20% (2012)CBD Delhi has the lowest average vacancy rate (4%) whereas NOIDA and Greater NOIDA have highest average rates (~26%)Vacancy risk11rent12RentalsThe rentals have shown a downward trend in the last 5 yearsThe highest fall in the rentals is in the CBD areas of Delhi followed by GurgaonThe fall in rentals was during the 2009 and 2010 and thereafter the rentals have shown an upward trendAbsorption by Industry13The absorption considered are the 3 year moving averages for the sectorsThe absorption for the IT sector has shown a downward trend in the last three yearsThe IT and BFSI industries together contribute more than 57% of the total absorptionCapital Value Range14High variance in the average rates has been observed in the SBD. The maximum difference in the rates has been observed in the Bhikaji Cama Place micro marketThe least variance in the capital values have been observed in NOIDA and Greater NOIDACapital ValuesNCR projections15MUMBAICOMMERCIAL OFFICE MARKET16zones17Business DistrictMicro-marketsCBD & Off CBDNariman Point, Cuffe Parade, Ballard Estate, Fort, Mahalaxmi, WorliAlternate Business District (ABD)BKC, Bandra (E), Santacruz (E), KalinaCentral MumbaiParel, Lower Parel, Dadar, PrabhadeviSuburban Business District (West)Andheri, Jogeshwari, Goregoan, Western Exp Highway, Malad, BorivaliSuburban Business District (Central)Kurla, Ghatkopar, Vikhroli, Kanjurmarg, Powai , Bhandup, ChemburPeripheral Business District (PBD)Thane, Airoli, Vashi, Ghansoli, Rabale, Belapur18Distribution of Office stockDistribution of Office Space in MMRPrimarily driven by the Banking, Financial Services and Insurance (BFSI), followed by the IT and tradingBuoyant leasing demand in Traditional CBD continues Limited supply of Grade-A offices and large contiguous office premises in CBD, led to growth of the ABD and SBDThe total occupied space in the region is about 77 mn sft. The growth rate in the gross occupied space in the region has been 14% (average)

Distribution of occupied stock19The SBD Central and PBD have shown a rapid trend in the occupancy The occupied space in the CBD (0.5 mn sft) has shown a very minimal increase in the last 5 years compared to a very high occupied space increase in Western SBD (~10 mn sft)Distribution of Gross Occupied Stock by Micro-marketsAnnual supply20During the last 5 years approximately 57.2 mn sft of commercial space had been added.It is estimated that ~35.4 mn sft would be added in next 5 years (~ 0.71 mn per annum average)Annual SupplyAnnual absorption21During the last 5 years ~ 36.3 mn sft of commercial space has been absorbedThe absorptions over the last 5 years is ~2% higher than the cumulative Year-on-Year Supply in the last 5 yearsAnnual AbsorptionDistribution of absorption by micro-markets22Higher rentals and transportation issues in the CBD have increased the outward movement from CBD to ABD and Central Mumbai.During the last five years a cumulative negative absorption in the CBD has been observed which can be attributed to the increase in absorption levels in other areas. Annual Absorption in Micro Marketsvacancy23Vacancy TrendsThe average vacancy levels were at a range of 4% during 2008 compared to a very high rates during 2012 at 22%The high vacancy levels in the recent past were due to the oversupply in the PBD and there has not been considerable variance in other areas. 24Vacancy riskVacancy Risk as of 2012The vacancy risks in the PBD are very high followed by SBD West. These two micro markets have high vacancy levels and the corresponding supply would take about 4 and 3.5 years to get absorbed respectivelyThe absorption in the ADB and Central Mumbai have been low which has increased the risk in these micro markets in the recent pastCapital value range25Traditionally the minimum range of the capital values in the CBD areas has been high. However the ABD has higher capital values compared to some of the parts of Central Mumbai. The capital values in other Business districts are comparatively low. However, the occupancies in these areas are also on the rise. Capital ValuesRent26RentalsThe rentals have shown a downward trend in the last 5 yearsThe highest fall in the rentals is in the CBD areas and Central Mumbai AreasThe fall in rentals was during the 2009 and 2010 and thereafter the rentals have shown a stagnation Absorption by industry27The absorption considered are the 3 year moving averages for the sectorsThe absorption for the IT sector has shown a downward trend in the last three yearsThe IT and BFSI industries together contribute more than 51% of the total absorptionAbsorption by IndustryMumbai Projections28BangaloreCOMMERCIAL OFFICE MARKET29Zones30Business DistrictMicro-marketsCBD & Off-CBDMG Road, Residency Road, Richmond Road, Lavelle Road, Infantry Road, Cunningham RoadSBD Indiranagar, Koramangala, Airport Road, Old Madras RoadPBD EastKR Puram, Whitefield, Brookefield, HoodiPBD SouthElectronic City, Hosur Road, Kanakpura RoadORRKR Puram ORR, Marathalli ORRDistribution of commercial stock31Distribution of Office Space in BangaloreCBD and off-CBD have typically been preferred mostly by non-IT companies, looking for smaller office configurationsInventory of around 99 mn. sq.ft. of office space currently operationalOccupied stock by micro-markets32The SBD Central and PBD have shown a rapid trend in the occupancyControlled supply and steady absorption run rate are expected to keep vacancy in the Bengaluru office market intact. Vacancy is expected to be in the range of 12-13% during FY14-16. Further, weighted average rentals are projected to grow at 5% p.a. for the next three years. Distribution of Cumulative Gross Occupied Stock by Micro-marketsAnnual supply33During the last 5 years approximately 42.9 mn sft of commercial space had been added.It is estimated that ~41.1 mn sft would be added in next 5 years (~ 0.8 mn per annum average)

Annual Supplyabsorption34During the last 5 years ~ 47 mn sft of commercial space has been absorbedAnnual AbsorptionAbsorption by Micro-markets35Controlled supply and steady absorption run rate are expected to keep vacancy in the Bengaluru office market intact. KR Puram Marthahalli stretch on the Outer Ring Road and Hebbal in the north is attracting many corporates and are expected to witness growth in absorptionAnnual Absorption in Micro Marketsvacancy36Vacancy TrendsThe average vacancy levels have decreased from 25% to 13% from 2008 to 2012The high vacancy levels in the recent past were due to the oversupply in the PBD except on the ORR. Vacancy risk37Vacancy Risk as of 2012The vacancy risks in the PBD are very high followed by SBD South. These two micro markets have high vacancy levels and the corresponding supply would take about 2 and 1.5 years to get absorbed respectivelyThe absorption in the SBD have been low which has increased the risk in these micro markets in the recent past38RentRentalsThe rentals have shown a downward trend during 2009 & 2010 in the CBD. During the same period the PDB East and PBD ORR has shown an increasing trend. The fall in rentals was during the 2009 and 2010 and thereafter the rentals have shown a stagnation Absorption by industry39The absorption considered are the 3 year moving averages for the sectorsThe absorption for the IT sector has shown a downward trend in the last three yearsThe IT and BFSI industries together contribute more than 75% of the total absorptionAbsorption by IndustryBangalore projections40ChennaiCOMMERCIAL OFFICE MARKET41zones42CBD & Off CBD AreaCBD & Off CBD Area2SBD AreaPBD- AmbatturPBD- OMR & GSTSBD OMRAlwarpetEgmoreSaidapetAmbatturOMR RoadPerungudiAnna SalaiR K SalaiAdyarGST RoadCathedral RoadNelson Manickam RoadAnna NagarSemmencheryTaramaniKilpaukRoyapettahGuindySholinganallurThiruvanmiyurPoonamaleeGreams RoadNandanamThoraipakamChetpetTeynampetVadapalaniPallikaranaiCenotaph roadMylaporeEthiraj NagarSiruseriChamiers RoadNungambakkamMt. Poonamallee RoadPadurEgmoreR A PuramPorurKarapakkamG N Chetty RoadRK SalaiNavalurKodambakkamSanthomeKarapakkamChamier RoadT NagarGopalapuramDistribution of Commercial Stock43Distribution of Office Space in ChennaiTraditionally driven by Banks & Financial institutions and corporate offices of manufacturing industriesRecently emerged as a Tier II IT/ITeS destination Inventory of around 37 mn. sq.ft. of office space currently operationalOccupied stock by micro-markets44The gross occupied stock of Chennai has been consistently growing in the past 5 years. Distribution of Cumulative Gross Occupied Stock by Micro-marketsAnnual supply45During the last 5 years approximately 30.1 mn sft of commercial space had been added.It is estimated that ~25 mn sft would be added in next 5 years (~ 0.5 mn per annum average)

Annual SupplyAnnual absorption46During the last 5 years ~ 19.7 mn sft of commercial space has been absorbedAnnual AbsorptionAbsorption by micro-markets47There has been a fluctuation in the absorption trends in various micro markets of Chennai PBD South (OMR & GST) and PBD- West & North (Porur & Ambattur) are expected to witness the maximum amount of absorption in terms of volume as most of the new supply is located in these markets. Annual Absorption in Micro Markets48VacancyVacancy TrendsThe average vacancy levels have been fluctuating in the last 5 years. However, the average rates in 2008 and 2012 are at the same levels (~21%)The high vacancy levels in the recent past were due to the oversupply in the PBD OMR, GST due to oversupply in this area Vacancy risk49Vacancy Risk as of 2012The OMR GST and SBD are the most risky areas as of 2012 followed by CBD. The PBD Ambattur is the preferred locations for the commercial spaces in Chennai as of today. Rent50RentalsThe rentals in the CBD have shown a downward trend during 2009 & 2010 in the CBD. During the same period the PDB areas have shown an increasing trend. The fall in rentals was during the 2009 and 2010 and thereafter the rentals have shown a stagnation Absorption by industry51The absorption considered are the 3 year moving averages for the sectorsThe absorption for the IT sector has shown a an upward trend in the last three yearsThe IT and BFSI industries together contribute more than 66% of the total absorptionAbsorption by IndustryChennai Projections52HyderabadCOMMERCIAL OFFICE MARKET53zones54Business DistrictMicro-marketsCentral Business District & Off- Central Business District (CBD & Off-CBD) Banjara Hills, Jubilee Hills, Begumpet, Ameerpet, Somajiguda, Himayat nagarSecondary Business District (SBD) HITEC City, Kondapur, Madhapur, Manikonda, KukatpallyPeripheral Business District - West (PBD West)Gachibowli, Kokapet, Madinaguda, Nanakramguda, SerilingampallyPeripheral Business District - East (PBD East)Uppal, PocharamDistribution of commercial office stock55Distribution of Office Space in HyderabadTraditionally driven by Banks & Financial institutions and corporate offices of manufacturing industriesEmerged as a IT/ITeS destination Inventory of around 49 mn. sq.ft. of office space currently operationalSBD contributes more than the other micro markets in terms of availability of office spaceOccupied stock by micro-markets56The gross occupied stock of Hyderabad has been consistently growing in the past 5 years.The total occupied stock in the city has grown upto 61% in the last 5 years. Distribution of Cumulative Gross Occupied Stock by Micro-marketsAnnual supply57During the last 5 years approximately 22.5 mn sft of commercial space had been added.It is estimated that ~25.1 mn sft would be added in next 5 years (~ 0.5 mn per annum average)

Annual Supplyrent58RentalsThe rentals across the city have shown a downward trend. Vacancy rate59Vacancy TrendsThe average vacancy levels have been stagnant in the last 5 yearsExcept the CBD, the rest of the micro markets have shown a very fluctuating trends in the vacancy ratesVacancy Risk60Vacancy Risk as of 2012The PBD East and the CBD are the risky areas. The PBD West is the preferred locations for the commercial spaces in Hyderabad Absorption by Micro-market61The annual absorption growth for the CBD, PDB West has been consistentOn an average 1 mn sft per annum was being absorbed during the last 5 yearsAnnual Absorption in Micro MarketsAbsorption by industry62The absorption considered are the 3 year moving averages for the sectorsThe absorption for the IT sector has shown a an upward trend in the last three yearsThe IT and BFSI industries together contribute more than 81% of the total absorptionAbsorption by IndustryHyderabad Projections63puneCOMMERCIAL OFFICE MARKET64zone65CBDSBD WestSBD EastSBD NorthSBD SouthPBD WestPBD EastBund Garden RoadSB RoadKalyani NagarPCMCSatara RoadBalewadiAirport roadCampWakadewadiNagar RoadPimpriBibvewadiBavdhanHadapsarF C RoadAundhYerwadaChinchwadMarket YardHinjewadiKharadikoregaon parkkothrudMukund NagarWakadMundwaLaw Collage rdKondhwaPashan RoadPhursungiShivaji NagarBanerViman NagarUnversity RdDistribution of gross stock66Distribution of Office Space in PuneIT/ITeS and manufacturing sector sparked off construction activity in grade A office space market in last decade.With accelerated economic activities, demand for large office spaces have shifted to PBD from CBD Eastern and north-western locations holds maximum share of office space Emerging as a IT/ITeS destination Inventory of around 43 mn. sq.ft. of office space currently operationalOccupied stock by micro-market67The gross occupied stock of Pune has been consistently growing in the past 5 years.The total occupied stock in the city has grown upto 70% in the last 5 years. Distribution of Cumulative Gross Occupied Stock by Micro-marketsAnnual supply68During the last 5 years approximately 26 mn sft of commercial space had been added.It is estimated that ~24 mn sft would be added in next 5 years (~ 0.5 mn per annum average)

Annual SupplyAnnual absorption69During the last 5 years ~ 19.5 mn sft of commercial space has been absorbedAnnual Absorptionrent70RentalsThe rentals across the city do not have a specific trend. However, the rentals have come down in the last 5 yearsvacancy71Vacancy TrendsThe average vacancy levels have been fluctuating in the last 5 yearsThe CBD, & SBD (East & West) have vacancy rates in the range of 16% to 17% as of 2012The PBD & SBD (North & South) have vacancy rates in the range of 21% to 22% as of 2012Vacancy risk72Vacancy Risk as of 2012Inspite of having low vacancy levels in CBD and SBD West, the velocity of absorption is very low. The PBD have a faster momentum in absorption compared to SBD. Absorption by micro-market73The annual absorption growth for any of the micro markets has not been consistentOn an average 0.39 mn sft per annum was being absorbed during the last 5 yearsAnnual Absorption in Micro MarketsAbsorption by industry74The absorption considered are the 3 year moving averages for the sectorsThe absorption for the IT sector has shown a downward trend in the last three yearsThe IT and BFSI industries together contribute more than 79% of the total absorptionAbsorption by IndustryPune Projections75General TermsCOMMERCIAL OFFICE MARKET76Commercial Yield Curve77Lease Terms78MumbaiDelhi NCRBangaloreChennaiHyderabadPuneDeposit6 months6 months10-12 months6-10 months6 months6 monthsEscalation15% (3 yrs)15%15% (3 yrs) 5% (per yr)12-15% (3 yrs)5% per year15% (3 yrs)Rent Free Period3 months2 months; 3 months3 months2 month; Zero for fitted-out3 monthsLock-in- PeriodTenant: 36 month36 months1 yr (warm shell)36-60 months3636 monthLandlord: 61 months3-5 yr (if developer is undertaking fitouts)-Payouts79MumbaiDelhi NCRBangaloreChennaiHyderabadPuneCAMSRs 12-15/monthRs 13-15/monthRs 5-7.sq.ft/month15% markup on actual, 3 mth maintenance free periodRs 8/sqft/monthRs 8-10/monthBack up PowerPRO-RATARs 18-20 unit/monthINR 17-20/unit18-20/unitINR 20/unitPRO-RATAProperty TaxRs 50-80 CBD, BKC Rs 30 (per sft/mth)bourne by the lessor on actualsbourne by lessor on actualsbourne by lessor on actualsRs 1.25 sq.ft/month by the landlordbourne by lessor on actualsCar Parking (Rs/unit/ month)10000-12000 CBD; 8000 BKC; 5000K (SBD)6000 (Gurgaon); (4000-5000) PBD5000 (CBD) 2000-3000 (PBD & SBD)Free or about 1500-2000Free or about 2000-3000 in some3000-5000Cost of Construction (Hard Cost)80S.No Item DescriptionCost (Rs/sqft) on BUA aStructural Works- Sub structure & Superstructure1000bExternal Faade150- Aluminium Windows and ACP90- External Cladding & Painting Works60cHard Finishes Works100dCommon area interior work50eHVAC250Cost of Construction (Hard Cost)81S.No Item DescriptionCost (Rs/sqft) on BUA fPlumbing & Fire Fighting Works138.5- Internal Plumbing for Building50- External Water Supply System12- Plumbing High Side, Pumps & Equipment28- External Sewerage System16.5- Garden Hydrant10- Storm Water Drainage System22- Fire Fighting System65gElectrical Works386- Supply & Installation of Sub-Station Equipments100- Supply & Installation of DG and Underground Tank93- Internal Electrification for Base Building143- External cabling & external lighting system50Cost of Construction (Hard Cost)82S.No Item DescriptionCost (Rs/sqft) on BUA hElevators125iExternal Development, Landscaping & Horticulture Works215Total Cost of Construction2,415ProjectionS-Methodology83Forecasting of revenues of driver industriesDemand for office space is dependent upon the requirement of occupiers, whether it is for a new office, expansion of existing office or relocation. Requirement is in turn driven by the growth in revenues of these occupiers. For the purpose of this study, we have classified occupiers into four broad industries namely IT/ITeS, manufacturing, BFSI and other service sectors based on the past absorption trend of office space in India. These industries are referred to as the driver industries. Revenue growth for these driver industries has been forecasted for the 2013-2017 period using econometric forecasting models with input factors such as India GDP and world GDP.ProjectionS-Methodology84City level demand and supply forecast of office spaceDemand for office space in a city is dependent on the requirement of space by the occupying or driver industries. Driver industries for each of the selected cities were identified by studying their historic absorption trend. Demand projections for the next five years have been made based on the relationship established through regression model between a particular citys historic demand and revenue growth of the respective driver industries. We have assumed that this relationship will hold good in the future. In other words, while demand for cities like Pune has been forecasted on the basis of driver industries like IT/ITeS and manufacturing, for Mumbai it has been done on BFSI, manufacturing, IT/ITeS and other service sectors. Supply or new supply constitutes newly constructed buildings which are available for occupation. Under-construction and newly constructed space not yet available for occupation are not included in new supply. This has been estimated at the business district level for each city and this summation has been considered as the new supply for the city. ProjectionS-Methodology85Business district level demand and supply forecast of office spaceDemand at business district level has been estimated after analysing the historical share of each business district in the total absorption number of the city. This share has then been calibrated for future demand projections at the business district level. This calibration has been done after considering the estimated new supply, current vacancy level, driver industries performance and existing tenant profile for each business district. After this, city level forecasted demand has been distributed among business districts based on their estimated share over the next five years. New supply for the first three years of the forecast period has been estimated based on the delivery schedule of the existing under-construction projects. For the remaining two years, factors such as the availability of vacant land, expected incremental demand, vacancy threshold of respective business districts, market survey and interaction with developers have been considered for estimating the same. Property tax86CityPeriodTax FormulaMumbaiAnnual=Area In sqft*2.660%*Ready Reckoner RatePuneAnnual=Area in sqft*51+397BengaluruAnnual=G=(D+E+F)*10 months, I=(G*H)/100, J=G-I, K=J*20%ChennaiHalf Year=Annual Value*Tax RateHyderabadAnnual=total plinth area (in SFt)*3.5*Monthly Rental per sqftProperty tax87CHENNAI GRADE ANNUAL VALUE HALF YEAR TAX(as % of A.V) Gen.Tax Edu.Tax Total Lib.(Less) Total I Rs.1.00 to 5003.75%2.50%6.25%0.37%6.62%II Rs.501.00 to 10006.75%2.50%9.25%0.67%9.92%III Rs.1001.00 to 50007.75%2.50%10.25%0.77%11.02%IV Rs.5001.00 & Above9.00%2.50%11.50%0.90%12.40%Thank YouMUMBAI PUNE GURGAON BANGALORE HYDERABAD CHENNAI KOLKATA

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