Bangalore Retail Real Estate

Bangalore Retail Real Estate: JLL REIS**  Report
Bangalore: Retail

* Demand is weak in 3Q 2011
   
* Rents are stable across all sub-markets

 * Capital values remain stable across all sub-markets

Demand..!

Demand for space in malls in Bangalore remained weak in 3Q 2011. However, large-format retailers, such as Reliance and the Future Group, expanded in the city’s high streets.

Net absorption in 3Q 2011 was 5,85,000 sq. ft (54,348 sq. meter )in 3Q 2011. The high streets in Indiranagar, Koramangala, Whitefield, BEL Road and Old Madras Road accounted for 1,16,646 sq. ft (10,836 sq. meter) of leasing activity.

Overall vacancy rates increased from 4.9% in 2Q 2011 to 7.9% in 3Q 2011 due to the completion of the Park Square Mall in Whitefield and Soul Space Arena along the Outer Ring Road, each with an average occupancy rate of about 66%.

Key transactions in 3Q 2011 included Reliance Digital’s lease of nearly 21,000 sq. ft (1,951 sq. meter) in the high street on Residency Road and Inmark’s lease of 14,000 sq. ft (1,301 sq. meter) on the high street on Infantry Road in the Prime City sub-market, Tanishq leased 10,000 sq. ft (929 sq. meter) in Jayanagar and Hyundai leased 5,400 sq ft (502 sq. meter) on Airport Road, both in the Secondary sub-market, while, in the Suburbs sub-market, Bodycraft leased about 7,200 sq. ft (669 sq.meter) in Whitefield.

Supply..!

The Park Square Mall by Ascendas completed in Whitefield in 3Q 2011, adding a built-up area of 4,50,000 sq ft (41,806 sq.meter) to the market and Soul Space Arena along the Outer Ring Road added a built-up area of 2,50,000 sq. ft (23,226 sq. meter). The Park Square Mall commenced operations with a healthy occupancy rate due to good pre-commitments in previous quarters, and has such anchor tenants as Spar Hypermarket and Inox.

Asset Performance..!
Rents in the Prime and Secondary sub-markets remained stable at 2Q 2011 levels in 3Q 2011, while those in the Suburbs sub-market rose marginally by 3.7% qoq due to the completion of the Park Square Mall by Ascendas, where rents are above the sub-market’s average.

Capital values in malls in the Prime City and Secondary sub-market also remained stable, although they increased by 4.4% qoq in malls in the Suburbs sub-market as these spaces commenced operations with healthy occupancy rates. Moreover, the Park Square Mall by Ascendas demanded a capital value above the sub-market’s average.

One Year Outlook..!
With some 54% of the expected supply in 2H 2011 already pre-committed, net absorption is forecast to increase to 23 lakh sq. ft (2,13,677 sq. meter of the total annual supply of 33 lakh sq. ft (3,06,580 sq.meter) by end- 2011. With low leasing activity, Bangalore is unlikely to see a significant increase in demand for at least another six months.

Do not expect demand to keep pace with supply and vacancy rates are forecast to increase from 7.2% in 3Q 2011 to 7.7% at end 2011.

Despite this, we expect rents to recover across all sub-markets by the end of the year as new, good-quality malls come on stream.

(Note: Bangalore Retail refers to Bangalore’s overall retail market)

** Real Estate Intelligence Service, Jones Lang LaSalle

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