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The Seven Stars of India

India’s best performing micro markets for occupiers


 On Point • The Seven Stars of India
On Point • The Seven Stars of India 

Through the Turn


With India’s economic recovery well under way, its commercial real With the forecasted growth of net completions expected to outpace
estate market is beginning to stabilize. While the landscape will that of net absorption, a significant supply overhang is expected to
remain favourable for tenants in 2010, landlords will have greater remain over the next one year. This will lead vacancy level across
influence starting in 2011. This closing window of opportunity for India, which was at 17.2% at end-2009 to rise to mid 20% by
occupiers means that they should be proactively looking to lock in end-2010. Locational advantage and tenant mix will serve as key
attractive leases in the near term as office rents are beginning to differentiators as landlords struggle to lease unoccupied space.
bottom out and options for large, quality space abound. The freefall in rental values has stopped or slowed significantly in all
Indian metros with the exception of NCR-Delhi and Mumbai. While
Indeed, most cities in India have already witnessed an uptick in the these two cities are currently feeling the affects of a large supply
volume of lease transactions in 1Q 2010 with NCR-Delhi, Mumbai pipeline in the short term, they are also expected to lead the rebound
and Hyderabad having recorded more than a million sq ft of leases in the property cycle, followed by Bangalore, Chennai, Pune,
each. In 2009, occupiers showed a strong preference towards Hyderabad and Kolkata.
operational vacant stock rather than projects under construction,
a departure from 2007-08.

Figure 1: Pan India supply demand scenario 1Q 2010


80 %

70 8%
Completions/Absorption (million sq ft)

60 %
8.

.9

0 0%
Vacancy (%)
.

0 16%
.

.6
1.6

.

0
.1

1%
.9
.0

9.
8.8
8.8

0 8%
.8
.

19.6

10 %

0 0%
00 006 007 008 009 010F 011F 01F
New Completions Net Absorption Vacancy
Source: Real Estate Intelligence Service

Figure 2: Vacancy and absorption fluctuation 1Q 2010

70 70%
(Net Absorption as Percentage of Available Stock)

60 60%
Available Stock for Absorption (million sq ft)
(Vacant Stock from Previous Qtr +
New Completions in Current Qtr)

Quarterly Absorption Rate (%)

0 0%

0 0%

0 0%

0 0%

10 10%

0 0%
Q0

Q0

Q0

Q0

Q06

Q06

Q07

Q07

Q08

Q08

Q09

Q09

Vacant Stock from Previous Qtr New Completions in Current Qtr


Quarterly Absorption Rate Net Absorption
Source: Real Estate Intelligence Service
 On Point • The Seven Stars of India

The Changing Occupier


The IT/ITES industry has traditionally been a major driver for Grade A office space
demand throughout India. In the face of severe cost pressure during 2009, both
domestic and multinational players curbed real estate costs and expansion plans.
The global economic recovery, along with rising software & services exports, has once
again fuelled demand from the IT/ITES sector which accounted for nearly half of the
absorption witnessed in 1Q10.

A similar story was observed in India’s “Sunshine Sectors” of telecom, pharmaceuticals


and manufacturing which, spurred by low rents, only provided weak, opportunistic
demand for office space in 2009. 1Q10 saw a surge in demand from the BFSI and
telecom sectors in particular. Going forward, the IT/ITES and BFSI sectors will lead
the charge as net absorption of office space is forecasted to grow at a CAGR of 29.5%
from 19.6 million sq ft in 2009 to 42.6 million sq ft in 2012.

Figure 3: Quarterly rental value fluctuation 1Q 2010


% Q-o-Q Change in Stock Weighted Rental Values

-0. -0. -0.1 -0.1 -0.0 0

India

Bangalore

Pune

Chennai

Hyderabad
1Q10
Kolkata
Q09
NCR-Delhi Q09
Q09
Mumbai 1Q09

Source: Real Estate Intelligence Service

Figure 4: Sectoral classification of leasing activity in 2009

Sectoral Classification of Leasing Activity in 009

100%

80%
Sectoral classification (%)

60%

0%

0%

0%
NCR-Delhi Mumbai Bangalore Hyderabad Chennai Pune Kolkata

IT/ITeS BFSI Telecom Manufacturing Infrastructure Others

Source: Real Estate Intelligence Service


On Point • The Seven Stars of India 

New Strategies for the Post-Downturn Era


As new market realities unfold, the real estate strategies employed
Occupier Strategy
by occupiers will depend in large part on the share of their
operational footprint within India vs. abroad. The occupiers, whom 2009 2010 2011 2012
Occupier
we’ve clubbed into three types (primarily global footprint – long in Type 1H 2H 1H 2H 1H 2H 1H 2H
India, primarily global footprint - new to India and domestic footprint), A
will see their strategies progress from cautious to optimistic at
B
differing rates.
C
Regardless of operational footprint, in 2010 occupiers are adjusting
their decision parameters with respect to portfolio rationalization, LEGEND Cautious Optimistic Growth Acceleration
cost reduction and location section. Source: Jones Lang LaSalle Meghraj Research

A. Occupiers who have a global footprint, primarily operating out of Europe or the US, but are new to the Indian market. They face global cost pressures but
do not want to miss the India cost arbitrage benefit. For example: Amazon, First Data, ANZ Bank.
B. Occupiers who have a global footprint and have a long presence in the Indian market. These are tapping the present window of opportunity. For example:
RBS, HSBC, Deutsche Bank, E&Y, Accenture.
C. Domestic occupiers who foresee brighter economic times in the near term. For example: TCS, WIPRO, Uninor, Reliance being a few.

Decision Parameters

2009 2010
• Consolidation to give way to slow expansion towards
• Consolidation of multiple office spaces within a city
a multiple location strategy - suburban back office
Portfolio Rationalization • Value recovery from underutilized properties through coupled with a CBD head office
sale or subleasing
• Opportunistic sales and subleasing to continue,
• Occupiers with a long term India vision and clarity especially with prime city properties
on location opted to “buy” instead of “lease”
• Buy vs. lease will continue to be closely scrutinized
• Increased focus on reducing operational costs • Cautious optimism leads to slow renewal of hiring and
Cost Reduction/ including headcounts expansion in human resources and real estate
Operational Efficiency
• Halt to expansion and diversification plans • Expansion options revisited

• Rather than waiting and watching markets, occupiers • Extent of leverage reduced with demand stabilization
actively renegotiated on rent and incentives to
the maximum possible extent • Still no room for large scale rental increments
Leverage
• Long lease negotiation periods – awaiting global • Leasing activity gains momentum – occupiers lock in
expansion approvals as a buffer against slowly rising rents

Completed V/S • Focus remains on operational projects


• Only operational, or ‘ready to move in’ spaces are
Under-construction within the consideration set • Under-construction properties with a maximum horizon
Building Preference of 6-8 months might also be considered
• Tier I cities will continue to remain the most preferred
• Focus on India’s top 7 markets (Tier I and Tier II cities)
locations, followed by Tier II markets
Location • Scrutinize cost/benefit of a CBD location and actively
• Better performing Tier III cities might be considered by
explore options in SBD and suburbs
year end

• Demand from global players, headquartered abroad, might catch up with domestic occupier demand by the year end.
• IT/ITeS sector will continue to lead, followed by sunshine sectors including Telecom, Pharma and BFSI. Industrial growth
might spur office space demand from the manufacturing and engineering sector.
Moving Ahead • Occupiers to remain flexible in option selection; focus on growth and remain operationally efficient.
• Uncertainty over headcount will remain a challenge for CREs as they ensure that corporate real estate strategies are in
line with broader organizational objectives.
• Occupier focus will be on Special Economic Zones, due to the STPI sunset clause by March 2011.
 On Point • The Seven Stars of India

The 7 Stars of India


A relative comparison of 16 micro-markets across India’s tier I & Based on relative scores, which are weighted average indices for
tier II cities was carried out in order to identify those which are individual micro-markets, the best performers were collectively
most favourable for occupiers. The analysis included a wide range titled as ‘The Stars of India’. These micro-markets shall maintain
of real estate, infrastructure and socio-economic parameters. top positions for occupiers, regardless of the industry type, having
Micro-markets were selected based upon expected supply, occupier witnessed substantial leasing activity in the past, substantial rental
demand and indicator movement. Central business districts and correction making them affordable up to year 2005-06 levels and
other high priced, low supply office destinations were not included robust and good quality future supply.
in the analysis.

Delhi – NCR Mumbai Bangalore Chennai Pune Hyderabad Kolkata


Thane-Navi Mumbai
Western Suburbs

Micro Market
Eastern Suburbs

SBD Bangalore

SBD Chennai

Hitech City &


SBD Central

Gachibowli
SBD North

SBD Pune
Whitefield

Hinjewadi

Salt Lake
Gurgaon

Suburbs

Rajarhat
Noida

Demand 1.15 0.85 0.85 0.90 0.90 0.83 0.78 1.05 0.73 0.95 0.88 0.90 0.83 1.10 0.73 0.78
Real Estate Parameters

Supply 1.15 0.88 0.25 0.45 0.38 0.28 0.73 0.73 0.65 0.58 0.75 0.80 0.50 1.00 0.30 0.35

Indicator 0.70 0.70 0.48 0.45 0.43 0.48 0.53 0.30 0.35 0.40 0.40 0.40 0.43 0.40 0.35 0.25
Movement

Real Estate 0.83 0.66 0.70 0.65 0.72 0.64 0.76 0.68 0.57
1.06* 0.72* 0.84* 0.77* 0.78* 0.94* 0.59*
Score

Infrastructure 4.50 4.50 4.00 4.25 3.50 4.00 3.50 4.50 4.00 4.00 3.50 4.00 3.50 4.75 3.25 3.75
Other Occupier Considerations

Social &
Physical 3.45 3.30 3.90 4.80 3.85 3.55 3.65 3.98 3.33 3.45 2.68 3.80 2.90 2.80 3.00 3.78
Environment

Socio-
Economic & 3.78 3.94 3.71 3.73 3.59 3.60 3.01 3.14 3.10
3.87 4.58 4.19 3.67 3.88 3.58 3.77
Infrastructure
Score

Source: Real Estate Intelligence Service

• The scores provided above are weighted average indices scored from an occupier point of view. This essentially enumerates that higher the rental
depreciation, larger the vacancy fluctuation and more the SEZ and STPI expansion option availability in a micro-market, higher would be its scoring.
• Within the real estate parameters a higher focus has been provided to ‘Occupier Demand’, followed by ‘Supply’ and ‘Indicator fluctuation’ within a city.
• The segmentation above aims at combining quantitative parameters with qualitative assessment to identify one ‘STAR’ performer from each city. Some
of the remaining nine micro-markets were a close second to the star performers with strong fundamentals. These select micro-markets might emerge as
rising stars of the future.
On Point • The Seven Stars of India 

Indicators Employed Market Segmentation


The scores listed are a weighted sum index for each of the seven Keeping city dynamics, historical growth and other externalities
broad parameters covered in our analysis. The sub-indicators in mind, one micro-market from each city has been shortlisted to
covered under each parameter are explained below. represent the star in that region. The star micro-markets represent
the opportunities that occupiers have in each city to expand their
Supply: A weighted index inclusive of: base into.

• Existing stock Micro-market Segmentation


• Future supply till 2012 City Star Aspirant
• STPI options for next one year NCR Gurgaon Noida
• SEZ availability for next one year (ready to move in options for SBD Central, Thane &
Mumbai SBD North
Navi Mumbai
occupiers till 2011)
Bangalore SBD Bangalore Whitefield
Maximum supply score is 1.5 Chennai SBD Chennai OMR
Pune SBD Pune Hinjewadi
Demand: A weighted index inclusive of: Hitec City &
Hyderabad
Gachibowli
• Average annual absorption from 2007 to 2009
Kolkata Salt Lake Rajarhat
• Average annual absorption for 2010 to 2012 (forecast) Source: Real Estate Intelligence Service

• Vacancy change from peak (3Q 2008) and forecast for a year
Stars: ‘Market is moving, go lock a deal’
ahead
• Rents have reached their lows
• Pre-commitment status (future supply till 2011)
• Leasing activity in existing projects is high, followed by projects
Maximum demand score is 1.5 getting operational in next six to nine months
• Occupiers A, B and C (as defined in the occupier strategy
Indicator Movement: A weighted index inclusive of:
section) hold these as their first preferences for city expansion
• Rental decline from peak, and forecast for a year ahead • Large scale leases recorded in second half of 2009 and first half
• Rental overheads such as CAM charges and property tax of 2010
• Markets moving towards rent recovery in next six to eight months
Maximum indicator score is 1.0

Other Externalities: A weighted index inclusive of: Aspirants: Options available but not for too long. Focus on
rental negotiation; opt for the best option available.
• Infrastructure: new infrastructure initiatives, geographical • Marginal rent compression possible
expansion, new transport and connectivity links, proximity to • Leasing activity picked up from first few months of 2010
airport, telecom and power availability
• Second preference for occupier A, first preference for occupier B
• Social and Physical Environment: seismic risk, international and C
level educational, medical and social facilities, city culture and
• Developers should continue to demonstrate flexibility in pricing
recreation options, star hotel accommodation, cost of living and
and offer rental incentives
cost of expatriate accommodation
• Rental recovery in 2011, not a 2010 picture
Maximum externality score is 5.0

A supply overhang over the next two years would imply that the Stars and the Aspirants would compete directly with each other in
attracting occupier demand. While Stars have traditionally been popular amongst occupiers (especially the A and B categories), they
would continue to press them against Aspirants to offer more price discounts. By doing this the occupiers would try to stretch their
negotiation leverage till second half or end of 2010, which might even postpone rental increments in Stars in the near future.
 On Point • The Seven Stars of India

The Seven Star Quadrant Analysis


Star micro-markets are a combination of high real estate development, coupled with a well developed support infrastructure and a
sustainable social and business environment.

.70
SBD North
.0
Infrastructure, Social & Physical Environment Scores

.0
SBD Bangalore
.10
SBD Central
.90 Gurgaon
Western SBD Pune
Salt Lake Eastern Suburbs Noida
.70 Suburbs
SBD Chennai
Whitefield Hitech City &
Thane & Gachhibowli
.0 Navi Mumbai

.0

Hinjewadi
.10 Rajharat Star
Chennai Suburbs
Aspirant
.90
0.0 0.0 0.60 0.70 0.80 0.90 1.00 1.10
Real Estate Scores

Balanced Low on S&P* High on RE** Outliers


Balanced markets offer a great mix Although comparable to the Leaders among the pack in terms of SBD North and SBD Bangalore are
of social and physical environment ‘Balanced’ in terms of real estate real estate indicators, they compare high on real estate activity, as well
along with favorable real estate indicators, they score low on social equably to the ‘Balanced’ in social as social/physical infrastructure – an
indicators. and physical environment. and physical environment and are attractive combination for occupiers.
With all these markets dependent A balanced approach towards preferred destinations for occupiers. Salt Lake has well established
on IT/ITes industry, their strategy development would result in They should strive for becoming a infrastructure but lags behind in
should be to offer the best arbitrage increased preference towards these world class destination by focused real estate growth. Landlords must
on both fronts to remain competitive. locations. efforts towards enhancing social and continue to focus on affordable
physical environment. rents.
• SBD Pune • Rajharat • Gurgaon • SBD North
• SBD Chennai • Hinjewadi • Hitec City and Gachibowli • SBD Bangalore
• SBD Central Mumbai • Chennai Suburbs • Salt Lake
• NOIDA
• East Suburbs Mumbai
• West Suburbs Mumbai
• Whitefield
• Thane & Navi Mumbai
Source: Real Estate Intelligence Service *S&P: Infrastructure, Social and Physical Environment **RE: Real Estate
On Point • The Seven Stars of India 

Introduction to the Seven Stars of India

DELHI NCR Gurgaon


Reasons for Success
Locations of Interest
• DLF-Cyber City
Gurgaon is a clear winner when it comes to occupier
• Golf Course Road demand and availability of options due to sufficient quality
• MG Road supply, steep rental depreciation and flexible approach of
• Sohna Road developers (led by DLF). It also scores high on a fair mix
of retail, residential and hospitality concentration, MRTS
• Udyog Vihar transportation and regional connectivity, aided by proximity
Key Developments* to the international airport.
• DLF Cybercity NOIDA comes close as a second alternative, especially for
• Time Tower IT occupiers, boasting of an excellent infrastructure and
lower rentals. Moving ahead, both Gurgaon and Noida
• Vatika Business Park
would compete for tapping occupier demand.
• Welldone Tech Park
• Unitech Infospace SEZ However, we believe that Gurgaon will continue to maintain
its leadership position in the future.
• DLF Silokhera

MUMBAI SBD North


Reasons for Success
Locations of Interest

• Andheri
SBD North (primarily Andheri), at the heart of Mumbai, is
• Andheri-Kurla Road
closer to the city airport, has an under-construction MRTS
connectivity, and boasts of more than dozen 3-5 star hotels,
Key Developments* malls, social, medical and recreational facilities.

With more than 3 million sq ft of future supply expected in


• Kalpataru Square the next few months and a diverse mix of occupiers, SBD
North has recorded one of the best absorption rates in
• 215 Atrium Mumbai over the past two years.
• Nataraj
Thane, Navi Mumbai, Western and Eastern suburban micro-
• Akruti Star
markets shall continue to attract IT/ITeS occupiers primarily
• Leela Business Park due to affordability.

BANGALORE SBD Bangalore


Reasons for Success
Locations of Interest
• Outer Ring Road
Offering Grade A office space at the most affordable rental
• Inner Ring Road ranges (INR 38-40 psft pm) among the secondary districts
• CV Raman Nagar in the country, SBD Bangalore has witnessed more than 5
• Bannerghatta Road million sq ft of average annual absorption from 2007-2009.

Key Developments* With proximity to key residential areas and availability of


large land parcels, connectivity to the international airport,
elevated expressways, the SBD micro-market in Bangalore
is currently the largest micro-market in the country in terms
• Embassy Manyata Tech Park
of operational grade A commercial stock with highest
• Vrindavan Tech Village occupancy rate.
• Pri Tech Park
We foresee the trend of single digit vacancy to continue
• RMZ Ecospace in this micro-market due to controlled supply pipeline and
robust occupier interest.

*Key developments include properties that are either operational or getting operational in the next six to eight months and witnessing large active leasing.
10 On Point • The Seven Stars of India

HYDERABAD Hitec City and Gachibowli


Reasons for Success
Locations of Interest
Having witnessed more than a million sq ft of leasing activity
• Hitec City in 1Q 2010, Grade A office properties in Hitec City and
• Nanakramguda Gachibowli have attracted a fair share of the resurging IT
demand (TSI Waverock and K Raheja building 9 and 11).
Key Developments* This micro-market offers good airport connectivity, well laid
road and rail infrastructure, as well as solid IT infrastructure
(Cyberabad). There are multiple spatial options available
• K Raheja Mindspace Building 9 (particularly for IT companies), offering quality office space
at affordable rentals.
and 11
However, regional political sensitivity might discourage
• TSI Waverock occupiers to consider Hyderabad city in the short-term. Still
• DLF Cybercity Hitec City and Gachibowli will clock good amount of leasing
in the future primarily due to developed infrastructure,
presence of quality tenants and affordable rentals.

PUNE SBD Pune


Reasons for Success
Locations of Interest
• Magarpatta • Nagar Road
SBD Pune excels over Hinjewadi due to better infrastructure
• Kharadi • Viman Nagar and proximity to residential locations, presence of support
• Kalyani Nagar • Aundh infrastructure such as hotels, malls, educational and medical
facilities. The SBD witnessed an average annual absorption
• Yerwada • Baner of 2.2 million sq ft from 2007-2009 (against less than a
million sq ft in Hinjewadi over the same time span), due to
Key Developments* relatively larger rental correction.
Encompassing major city locations like Magarpatta, Kharadi
• Magarpatta City and Kalyani Nagar, state of the art IT infrastructure, together
• Raheja Commerzone with a well established transportation network, and quality
LEED certified office space (amidst bottomed out rentals)
• EON SEZ (Kharadi) makes SBD Pune attractive for occupiers; notably the IT and
• Tech Park – I (Viman Nagar) manufacturing sectors.

CHENNAI SBD Chennai


Reasons for Success
Locations of Interest
The SBD and the suburbs of Chennai (primarily OMR) are
• Guindy closer in real estate scoring, as indicator movement and
• Mount Poonamalle Road demand influx has been comparable in the two micro-
markets (average annual absorption from 2007 – 2009
• Ambattur
was about 2 million sq ft each, with a similar rental drop of
• Santhome 25-30% from peak).

Key Developments* SBD Chennai has a large supply base and offers occupiers
multiple options for good quality, well-maintained properties
with a focus on ‘Green’ and ‘Sustainability’. Affordable rents
• DLF IT Park (SEZ) in a well sustained market further drive occupier interest.
• India Landtech Park
While SBD Chennai is currently far more attractive to
• Ambit IT Park occupiers as it offers strong regional connectivity, better
• Olympia Techpark social, institutional and residential infrastructure, suburbs
are poised to give a strong competition in coming years.

KOLKATA Salt Lake


Reasons for Success
Locations of Interest

• Salt Lake Sector V

Key Developments* Salt Lake is an established office destination of Kolkata,


offering excellent retail and residential catchments, hotels
• Infinity Benchmark and regional connectivity to IT/ITeS occupiers.
• Bengal Intelligence Park
However, moving ahead, Rajharat will score high due
• Globsyn Crystal to ongoing SEZ projects, quality office and residential
• South City Pinnacle properties, besides relative proximity to domestic and
international airport.
• Godrej Water side
• Srijan Techpark

NCR, Mumbai and Bangalore lead the leasing activity in India, followed by Hyderabad, Pune, Chennai and Kolkata
*Key developments include properties that are either operational or getting operational in the next six to eight months and witnessing large active leasing.
On Point • The Seven Stars of India 11

Micro-Market Positioning:
‘Stars’ have been on the lower end of the vacancy variation, while witnessing rental dips comparable to ‘Aspirants’.

Kick start 2010: post the downfall, where do they stand

,000
Vacancy Rise from Peak (Q 008 - 1Q 010) (Basis points)

,00
Suburbs Chennai Thane-Navi Mumbai
,000

Western Suburbs
1,00
Hitech City
Eastern Suburbs
& Gachibowli
SBD Chennai Noida SBD Central Gurgaon
1,000 Rajharat
Whitefield SBD Pune
Hinjewadi
00
Salt Lake SBD - North
SBD Bangalore
-
0% -10% -0% -0% -0% -0% -60% -70%

Rental Drop from Peak (Q 008 - 1Q 010) (% in INR terms)


Bubble Size: Existing Commercial Office Stock as on 010 (in sq ft; inclusive of IT, Non-IT and SEZ space)
Source: Real Estate Intelligence Service Star Aspirant

• Gurgaon (NCR), Thane and Navi Mumbai (Mumbai) have • Most of the ‘Stars’ have witnessed relatively low vacancy
led all micro markets in rental depreciation, thus proving very rise from peak, as demand has managed to arrest micro-
attractive for many occupiers. However, despite a low rental market decline. Mostly suburbs have witnessed large vacancy
correction in micro-markets such as Salt Lake (Kolkata), fluctuations (beyond 1000 basis points), due to a supply
SBD Bangalore, SBD Chennai, Whitefield (Bangalore) and overhang and a demand drought. This continues to exert
Hinjewadi (Pune), they continue to remain attractive for pressures on rents in these micro-markets.
occupiers primarily due to low rental base, quality future
supply and existing tenant profile.
12 On Point • The Seven Stars of India

Circa 2011: picture of a year ahead

1600
Hinjewadi SBD-North
100

100
Thane-Navi Mumbai
Vacancy Variation (Basis Points)

1000 Noida

800
SBD-Central Hitech City & Gachibowli
600 Whitefield Eastern Suburbs
Gurgaon
00 Suburbs Chennai
SBD Pune
00 SBD Chennai SBD Bangalore
Rajharat Salt Lake
Western Suburbs
0

-00
-10% -8% -6% -% -% 0% % % 6%

Rental Variation (% in INR terms)


Bubble Size: Future Supply of commercial office till early 011 (in sq ft; inclusive of IT, non-IT and SEZ space)
Source: Real Estate Intelligence Service Star Aspirant

• Micro-markets will get aligned closer to rental stability, NCR


and Mumbai being exceptions. It is visible that a lead in rental
appreciation would be taken by micro-markets with less future
supply like SBD Bangalore, SBD Pune and Salt Lake, wherein the
supply overhang is relatively less pronounced. Gurgaon is in the
left half due to large supply-poor demand scenario in upcoming
locations of Sohna Road, Golf Course Extension and Manesar,
which together shall witness supply of more than 15 million sq
ft over the next 3 years. Prime areas of Gurgaon such as MG
Road, NH-8 and Golf Course Road are expected to witness rental
price appreciation as early as 1H 2011 due to forecasted strong
demand recovery.
• Moving ahead, ‘Stars’ will witness relatively low vacancy variation
as these would be the ‘most preferred destinations’ for rising
occupier queries. Hence, these would either witness rental stability
or positive rental appreciation. Although NOIDA is expected to
witness rental pressure in the near-term, we foresee occupiers
returning to the NOIDA market due to strong and improving
infrastructure, emerging residential support at affordable pricing
and existing population of about a million.
• Most micro-markets are expected to reach their rental lows within
the next 2-3 quarters, if not reached as yet, which is reflected in
the chart above. This indicates that the window of opportunity
for occupiers, where balance of power favors them, continues to
shrink with every passing quarter.
On Point • The Seven Stars of India 13

A New Map of Opportunity


The matrix below highlights the market transition from being
overpriced-landlord dominated to affordable-tenant dominated
destinations. Stars have been the first ones to tap the opportunistic
demand resulting out of rental depreciation and ready good quality
supply. Banking upon strong demand, the Stars would also lead
rental appreciation and vacancy drop in 2011; Aspirants would
follow suit.

WINDOW OF LANDLORD
OVERPRICED TENANT BALANCED
OPPORTUNITY BALANCED
Micro-Market
PAST FUTURE
1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Gurgaon
Noida
SBD Central Mumbai
SBD North Mumbai
West Suburbs Mumbai
East Suburbs Mumbai
Thane - Navi Mumbai
SBD Bangalore
Whitefield
SBD Chennai
Suburbs Chennai
SBD Pune
Hinjewadi
Hitech City & Gachibowli
Salt Lake
Rajarhat

TENANT BALANCED LANDLORD BALANCED


WINDOW OF
Parameters OVERPRICED
(Balanced with a OPPORTUNITY (Balanced with a
tenant bias) landlord bias)
Rental Trend Rents peaking Rents falling Rents bottoming at a plateau Rents rising
Occupier Behaviour/ Renegotiate, consolidate, Consider BTS options, Hard
Avoid signing leases Sign leases / Renegotiate
Strategy relocate options
Low vacancy; Less option for Vacancy rising; Increasing High vacancy; Large number Peak or falling vacancy;
Availability of Space
tenants options of options Decreasing options
Good bargaining power;
Bargaining Power of High bargaining power;
Low bargaining power Incentives available but Weakening bargaining power
Buyers/ Occupiers Incentives available
reducing
Demand wanes and is
Supply lags strong demand No or few new project Demand recovers and
outstripped by new supply
Supply & Demand New projects planned in a launches as supply remains becomes strong. Limited but
Focus on completion but no ahead of stagnant demand new project launches
hurry
new launches
Source: Real Estate Intelligence Service
14 On Point • The Seven Stars of India

Authors
Abhinav Joshi, Assistant Manager, Research & REIS
abhinav.joshi@jllm.co.in
+91 124 460 5100

Abhinav Joshi joined Jones Lang LaSalle Meghraj in January 2007 and handles the Delhi-NCR
Research and Real Estate Intelligence Services (REIS) team. Based out of Gurgaon, he contributes
to topical whitepapers, property market digest and research deliverables on the industrial, commercial,
retail and residential real estate markets in India.
He has also worked on numerous projects encompassing market research, business location advisory,
feasibility and valuation. He is a town planner by qualification and is pursuing an executive education
from Indian Institute of Management (Kolkata).

Trivita Roy, Assistant Manager, Research & REIS


trivita.roy@jllm.co.in
+91 40 4040 9100

Trivita Roy has joined Jones Lang LaSalle Meghraj Research team in 2007. Based out of Hyderabad,
she contributes to topical whitepapers, property market digest and research deliverables on industrial,
commercial, retail and residential real estate markets in India. She is also responsible for Indian real
estate intelligence service (REIS).
Trivita is trained as City Planner from Indian Institute of Technology Kharagpur and has a two years
experience in real estate research.

Avinash Mirchandani, Assistant Vice President, Research and REIS


avinash.mirchandani@jllm.co.in
+91 22 6141 6500

Avinash Mirchandani supports the Jones Lang LaSalle Meghraj India Research & REIS team. Based
in Mumbai, he provides guidance and oversight on all of the team’s research outputs and bespoke
client projects. Avinash originally joined Jones Lang LaSalle in 2007 as the programme manager for
the World Winning Cities Research Programme, a multi-year research initiative conducted by our
Global Research team. Prior to that, he worked in a variety of consulting and research roles across
the biotech, aerospace and IT industries in the United States. Avinash holds a bachelor’s degree in
Economics from UCLA and an MBA from the Indian School of Business.

Abhishek Kiran Gupta, Associate Director, Research & REIS


abhishekkiran.gupta@jllm.co.in
+91 22 6141 6500

Abhishek Kiran Gupta leads the Jones Lang LaSalle Meghraj India Research team and is based in
Mumbai. He manages research operations on a Pan-India level and is responsible for the team’s
outputs, including research reports such as topical white papers, property market digests and bespoke
research projects based on specific client requirements. Prior to joining Jones Lang LaSalle, he had
seven years of experience in market research, business analysis and market strategy consulting,
servicing diversified industries including pharmaceutical, software publishing and insurance.
On Point • The Seven Stars of India 15
About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by
expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2009 global revenue of $2.5 billion,
Jones Lang LaSalle serves clients in 60 countries from 750 locations worldwide, including 180 corporate offices. The firm is an industry leader in property
and corporate facility management services, with a portfolio of approximately 1.6 billion square feet worldwide. LaSalle Investment Management, the
company’s investment management business, is one of the world’s largest and most diverse in real estate with more than $40 billion of assets under
management. For further information, please visit our web site, www.joneslanglasalle.com.
Jones Lang LaSalle has over 50 years of experience in Asia Pacific, with over 16,500 employees operating in 76 offices in 13 countries
across the region.

About Jones Lang LaSalle Meghraj


Jones Lang LaSalle Meghraj, the Indian operations of Jones Lang LaSalle, is the premiere and largest real estate professional services firm in India. With an
extensive geographic footprint across ten cities (Delhi, Mumbai, Bangalore, Pune, Chennai, Hyderabad, Kolkata, Kochi, Chandigarh and Coimbatore) and
a staff strength of over 2900, the firm provides investors, developers, local corporates and multinational companies with a comprehensive range of services
including research, consultancy, transactions, project and development services, integrated facility management, property and asset management, capital
markets, residential, hotels and retail advisory. For further information, please visit www.jllm.co.in

Real Estate Intelligence Service (REIS) India is a subscription based research service designed to provide you with cutting
edge insights into India’s diverse and challenging real estate markets through collation, analysis and forecasts of property market
indicators and trends across all major Indian markets across various real estate asset classes - office, retail, residential.

REIS empowers you with consistent and complete market data and analyses for all real estate indicators by specific micro markets. It is
supplemented by value added services including client briefings, presentations and rapid market updates.

For more details, contact,


Ananth Narayanan +91 98840 21335 N.Ananth@jllm.co.in or Abhishek Kiran Gupta +91 9820312065 Abhishekkiran.Gupta@jllm.co.in

Jones Lang LaSalle Meghraj offices


Bangalore Coimbatore Hyderabad Mumbai
tel +91 80 41182900 tel +91 422 2544433 tel +91 40 40409100 tel +91 22 24828400
fax +91 80 41182901 fax +91 422 2544422 fax +91 40 40409101 fax +91 22 24941321
Chennai Delhi Kochi tel +91 22 66581000
tel +91 44 42993000 tel +91 11 43317070 tel +91 484 3018654 fax +91 22 66581003
fax +91 44 42993001 fax +91 11 43317071 fax +91 484 4029394
Chandigarh Gurgaon Kolkata Pune
tel +91 172 3047651 tel +91 124 4605000 tel +91 33 22273293 tel +91 20 40196100
fax +91 172 3044212 fax +91 124 4605001 fax +91 33 22273297 fax +91 20 40196101

COPYRIGHT © 2010 JONES LANG LASALLE MEGHRAJ. All rights reserved. No part of this publication may be published without prior written permission from Jones Lang LaSalle Meghraj. The
information in this publication should be regarded solely as a general guide. While care has been taken in its preparation no representation is made or responsibility accepted for the accuracy of the
whole or any part. We stress that forecasting is a problematical exercise which at best should be regarded as an indicative assessment of possibilities rather than absolute certainties. The process of
making forward projections involves assumptions regarding numerous variables which are acutely sensitive to changing conditions, variations in any one of which may significantly affect the outcome,
and we draw your attention to this factor.