Bangalore witnessed the highest mall supply of 1.5 million sq.ft. in H1 2012

Over 30% retail mall space delayed till next year: Cushman & Wakefield
According to a recent Cushman & Wakefield report, the Indian retail real estate market recorded a deferment of more than 30 percent of retail mall space against the projected supply for the first half of the year. Approximately, 1 million sq.ft. of expected mall supply was deferred to second half of the year or next year. The overall vacancy rate for the major cities as of H1 2012 stood at 19.6 percent, marginally higher than the previous quarter.

NCR saw the highest mall supply deferment of over 80 percent maintaining vacancy levels at 28 percent. The region saw only 120,000 sq.ft. of mall supply in Q1 and no supply in the second quarter of 2012.

Bangalore witnessed the highest mall supply of 1.5 million sq.ft. in H1 2012. The retail activity in the city continues to remain strong as the new mall supply became operational with 90 percent occupancy, whilst overall city level mall vacancy stood at 12.6 percent.

Commenting on the findings of the report, Jaideep Wahi, Director, Retail Services, Cushman & Wakefield India, said: “This slowdown in mall construction need not be viewed as a negative growth indicator for the retail real estate segment. The current pace is, in fact, expected to help in maintaining a healthier supply to demand equation; especially for oversupplied micro-markets. With high vacancy levels as well as cautious expansion plans of retailers, the deferment of supply is a necessary measure to bring stability in the retail market.”

The report also highlights that rental values across most mall destinations within these cities remained largely stable, except for certain micromarkets in Bengaluru, NCR, Kolkata, and Mumbai where mall rentals have seen a growth over the previous quarter in the range of 2-13 percent. Elgin Road in Kolkata recorded the highest growth in mall rents at 12.4 percent over last quarter mostly owing to renewals of existing tenants at a higher value.

In the same period, some prominent high streets across major cities recorded higher increase in rental values as against malls, reflecting the bent of interest amongst retailers for high street properties. Select locations across Bengaluru (MG Road, Jayanagar, Koramangala, and Vitthal Mallya Road) recorded rental increments in the range of 8-9 percent over the previous quarter. Camac Street in Kolkata saw the highest increase in high street rentals at 25 percent followed by MG Road in Bengaluru at just over 9 percent.

PE firm Blackstone eyes biggest real estate play

To Buy 36% Stake In Embassy Groups Office Portfolio For $230 Million 

 

 

Blackstone Group is set to acquire 36% ownership in the tenanted office space portfolio of southern developer Embassy Property Developments for about $230 million (Rs 1,300 crore),said bankers close to the transaction.

This will be Blackstones biggest real estate deal in India,giving it part ownership of more than 12 million sqft office towers housing prominent technology names that drive the outsourcing economy.

Embassy,one of the top business park builders in the country,is demerging the FDI complaint office buildings in which Blackstone will acquire a significant minority interest.Blackstone has signed a term-sheet with the Bangalore-based developer and is conducting due diligence.The companys commercial play has largely been focused on the development of business parks,of which the two largestthe 100-acre Manyata Tech Park and the 65-acre Embassy Golf Links Businessare situated in Bangalore.

The tenant list of Embassys office buildings spread across Bangalore,Pune and Coimbatore includes IBM,Accenture,Capgemini, Atos Origin,Cognizant,Fidelity,Mercedes Benz and Target.

Embassy Group CMD Jitu Virwani and a spokesperson for Blackstone declined to comment.Embassy had shelved a $500-million initial public offering (IPO) last year.

The transaction values Embassys new holding company for office buildings at $900 million after rolling over Blackstones earlier investment in one of the projects.

Blackstone had acquired HDFCs minority stake in a large business park for $100 million,and the latest deal takes overall investment to about $330 million.The Blackstone investment will cover only tenanted office buildings and not those under development.

Blackstone owns hotels,shopping malls and office buildings primarily in North America and Europe.The PE major has shown appetite for Indian office buildings and struck smaller deals with developers like DLF in the past two years.Blackstones real estate portfolio,with an estimated worth of $48 billion,include Hilton hotels and the recent acquisition of Motel 6 from Accor.

Private equity firms and global investment houses are allocating a part of their portfolio to risk-free income yielding assets,such as IT business parks,which provide 9% to 12% assured returns besides providing capital value appreciation.

Baring Private Equity Partners invested $100 million for a stake in the office space portfolio of another Bangalore developer RMZ Corp earlier this year,while Singapore-listed investment house Ascendas is in advanced talks to buy out an IT SEZ of Shriram Properties in Chennai.

BANGALORED! Carl Zeiss opens research, assembly line

The 4.2-billion euro German manufacturing company Carl Zeiss has established a research and development unit and two manufacturing facilities in Electronics City in Bangalore.

Carl Zeiss has been present in India since1998,butlargely as a sales and service business. The company manufactures an array of products ranging from prescription spectacle lenses to diagnostic and surgical equipments that are used in the fields of ophthalmology, neuro-surgery and cancer treatment, and in camera lenses. It also manufactures precision measurement tools that are used in the auto, aerospace, and power sectors, besides manufacturing equipments required for the manufacture of integrated chips.

Speaking to Media before inaugurating the company’s Bangalore campus, Michael Kaschke, president and CEO of Carl Zeiss AG, said, “The investment into developing the infrastructure at our campus is Rs 30 crore.” He added that the company’s total investment in India, which includes acquisition of assets, is 25 million euro over the past 8 years. The R&D, which has the abbreviated name CARIn (Center for Applications and Research in India), will focus on the medical technology sector andlooktodevelop medical equipments tailored to the Indian market requirements.

“In ophthalmology,thereis an 80% chance that a doctor in India would be using Zeiss equipment,” said Kaschke. The company won’t be manufacturing medical equipments in India,butthe medicalequipment portfolio contributes a high percentage to its India revenueof Rs 600crore.

“I foresee that in India, by 2015-16, we will have 1,000 employees (from 300 at present) and our revenues would cross Rs 1,000 crore,” said Kaschke, and added, “India is evolving into a strategic business segmentof theZeissGroup.”

On the manufacturing front, the company has established an assembly line that would assemble precision measurement tools. But the biggest space allocation at the company’s Electronics City campus would be for the setting up of a prescription spectacle lens manufacturing facility.The manufacturing facility will have an installed capacity to produce 2,000 lenses a day, which could be scaled up to produce12,000lenses per day.

V Srinivasan, MD, Carl Zeiss India, said, “Some 500 million people needeye glasses in India. But the addressable market, meaning, people who can afford to buy them is only 125 million.”

Revenue sharing partnership between landowners and builders on the rise

Businessman Vijay Gupta has accumulated so much land in Gurgaon over the years that he is left with 1,500 acre even after selling huge tracts to builders as the Delhi's suburb has grown into a global business hub. Finding it difficult to sell off the land, Gupta has joined hands with builders and given them the rights to build the property on his land on a revenue share basis.

Gupta is just one among several land aggregators who have turned developers.

"Land owners see an upside in holding on to their land and doing such joint developments rather than selling. Returns are better this way," says Anckur Srivasttava, chairman of GenReal Property Advisers.

Gupta, chairman of Orris Infrastructure, recently tied up with the Noida-based The 3C Company for a 48-acre parcel of land in Gurgaon. Since Gupta had already taken approvals and permissions to build a group housing project on the land, his partner is in a position to launch the project in just four-five months. If 3C had bought land on its own, it would have taken at least a year or more to kick-start the project.

Gurgaon-based Sidharth Chauhan of Sidhartha Developers, Sharab Reddy of the Triangle Group in Bangalore and Prashant Solomon of Chintels in Gurgaon are tying up such agreements with developers to maximise their returns.

"The cost of doing projects has gone up with higher construction cost and approvals taking time. In a JDA, the developer is rid of all these issues and since there is no interest burden the overall margins are better as well," says Sharab Reddy, managing director of the Triangle Group, which holds over 500 acre that it started collecting in the mid-1980s. "The risk, too, is shared between the two partners."

Reddy, who turned a developer in recent years, is building close to one million sq ft of space in Bangalore. Just last week, he signed a JDA with a large developer in Bangalore for a 100-acre township.

In a typical agreement, the landowner and the developer sign an agreement to share revenues in 40:60 ratio. Where the price of land is very high, in city centre locations, for instance, the ratio can reverse as well.

Bangalore-based builder Puravankara Projects has adopted a similar strategy for its affordable housing brand, Provident. "Land is expensive and there is no point investing such large sums upfront, especially for affordable housing projects," says chief operating officer Jack Bastian Nazareth

7 million sq ft of prime office space absorbed in Q2 as compared to 5 million sq.ft in Q1

Leasing of prime office space across key cities in India witnessed an increase in the second quarter of 2012 with over 7 million sq.ft. of office space being absorbed across key cities.

According to the findings of CBRE's latest report, India Office Market View Q2, 2012, The NCR, Mumbai and Bangalore accounted for over 75% of the entire space absorbed in the country.

This is an encouraging number when compared to the space take up recorded in Q1, 2012 which stood at approximately 5.4 million sq.ft. The India office Market View is a quarterly report which provides a summary of prime office rents across key cities in India.

Supply continued to overtake demand in the second quarter of 2012, with more than 9 million sq ft of office space being added across the leading cities of the country. The new supply was largely concentrated in NCR, Bangalore and Mumbai, comprising almost 96% of the entire quantum added in the present quarter.

Most of the supply added comprised developments that were delayed for the past several quarters, especially in Mumbai. Other cities such as Chennai, Pune and Hyderabad experienced delays in project completions and a rationalisation of the supply pipeline.

Commenting on the findings of the report, Mr. Anshuman Magazine, Chairman and Managing Director of CBRE, South Asia Pvt. Ltd said "After the initial sluggishness witnessed in the market in Q1, 2012, the rise in absorption of office space across key markets is good news for the real estate sector in the country. However given the current economic scenario, coupled with a slowdown in large space requirements from big global companies, overall, the office market may witness a drop in absorption this year. The demand - supply gap continues to pressurise values across most micro-markets and could have negative implications on the rental growth. Improvement in the current situation will depend on the global economic environment and the government policies in India."

Bangalore-based Anu Solar to open 2,000 solar product stores in India

Solar powered electronic products will now be available at retail stores across the country. These stores will sell varied products ranging from solar water heaters to solar powered calculators, caps with fans that run on solar power, solar power storing batteries and inverters.

Bangalore-based Anu Solar pvt ltd, a leading manufacturer and seller of solar products, will open 2,000 stores across India on franchisee basis.

"These will be called 'one-stop experience stores' as the store and all the office equipments will also run on solar power, in order to show the public, the use and benefits of solar power," said T J Joseph, managing director, Anu Solar.

The government wants to encourage the use of solar energy but currently there are no private retailers for solar products.

The ministry of new and renewable energy has been promoting private entrepreneurs to open 'Akshay Urja shops' to sell and promote solar products but since 2002, only 300 shops have been established across the country and a good number of them are not functioning and there is no shop in the capital.

"We want the public to experience the power of solar and also raise awareness for the same," said Joseph. For Delhi, Joseph said there was an expression of interest from a client who plans to open 40 retail stores.

The company plans to make at least 20 stores operational by the end of the year, including one each in Bangalore and Madurai by September. With an investment of around Rs. 25 lakh per store, the turnover expected is Rs. 6 crore per year per store. By the end of the current financial year, the company hopes to open 50 stores.

These stores will sell a variety of products at MNRE subsidised rates. "As we are channel partners with MNRE, we provide government-approved subsidy on all products," said Joseph.

Solar photovoltaic cells, solar power storing batteries, inverters, solar water heaters are some of the products which the company will propagate the most and major sales will depend on them.

But to raise awareness and draw the interest of the consumers, the company has planned to put on display some interesting stuff like caps with fans that will run once you are out in sun, toys and calculators that can be recharged by solar power, bags with solar powered mobile charging points etc.

There is a 5-year unconditional warranty on all the products except solar power storing batteries for which the warranty period is 3 years. Anu solar will train the staff and will provide after-sales service on all the products.

Bangalores office space absorption shrinks

Office space absorption across key metro cities in the country in the first half of 2012 saw a decline of 21% at 13.4 million sqft as compared to the same period a year ago,when 16.9 million sqft was absorbed.
The latest office market report from real estate consultancy firm Cushman & Wakefield says that while Bangalore witnessed the highest absorption of office space in the first six months,of 3.01 million sqft,the city registered a 46% decline in absorption over the same period last year.Chennai reported a 12% decline in absorption.
This slowdown in demand is due to the cautious expansion plans of the IT/ ITeS sector as majority of demand in these cities is driven by the sector, said the report.
Sanjay Dutt,executive MD,South Asia,Cushman & Wakefield,said,The demand from the IT/ITeS sector is likely to remain subdued resulting in low leasing activity.
The National Capital Region saw the highest decline in office space absorption of 53%,but Mumbai and Hyderabad bucked the trend,registering 19% and 5% increases in absorption respectively.
The decline in office space leasing is indicative of a cautious approach from the occupiers,given the downward revision on the GDP outlook for the year, said Dutt.He added,There was some pent up demand from sectors such as BFSI which was absorbed,especially after a revision in RBI policies that where welcomed by certain domestic sectors.
Despite registering a fall in the absorption rate,Bangalore witnessed the highest addition of office space supply of over 4.1 million sqft in the first six months of 2012.
The report said that absorption in Bangalore was concentrated in the peripheral locations of the city such as Outer Ring Road,resulting in appreciation of rents of up to 10% in these areas.Bangalore is expected to be one of the most volatile office markets in 2012 given the rapid economic changes in India as well as across the world, said Dutt.

PROBLEM OF PLENTY

The slowdown in demand is due to the cautious expansion plans of the IT/ITeS sector Bangalore witnessed the highest addition of office space supply of over 4.1 million sqft in the first six months of 2012 Office space absorption in Bangalore was concentrated in the peripheral locations of the city such as Outer Ring Road