Colliers India Office Property Market Oveview Q2 2016

India Q2 2016

Table of Contents

INDIA Restricted Supply will put upward pressure on asking rents in most cities 4

MUMBAI Mumbai Office Inventory geared up with new completions 6

DELHI CBD and Aero City witnessed maximum leases 8

GURGAON Leasing activity rebounded with 46% QoQ increase 10

NOIDA Office market remained alive with about 1 million sq ft office absorption 12

BENGALURU Office Q2 2016 recorded robust demand and supply scenario 14

CHENNAI Demand revival leads to highest leasing in three consecutive quarters 16

PUNE

Pune market experiences high rental values across all micro markets 18

HYDERABAD Healthy leasing activities by technology firms increased office absorption 50% QoQ 20

KOLKATA Office market maintained status quo in Q2 2016 22

4 Research & Forecast Report | September 2014 | Colliers International

Return on Alternative Investments

Economic Barometer

Note: 1 Estimates as per International Monetary Fund 2 Wholesale Price Index (WPI), Latest estimates for Feb 2016 3 SBI interest rate < INR 1 crore Term Deposits for ≤ 1 Year

Foreign Exchange

INR - USD 67.60 67.37

INR- Euro 74.35 74.95

Parameters Q1 2016 Q2 2016 QOQ % Change

Gold 27,583 31,507 14.23%

Silver 35,403 44,755 26.42%

Equity (BSE Sensex) 24,346 27,144 11.49%

Realty Index 1,176 1,542 31.12%

Research & Forecast Report

India | Offi ceJuly 2016

Restricted Supply will put upward pressure on asking rents in most cities Upward leap maintained in Q2 2016 with 10.4 million sq ft of offi ce space absorption

Notwithstanding the global headwinds fostering slower growth in the developed world, India appeared to remain the bright spot evincing interest from leading fund managers. Offi ce market remained strong in Q2 2016 with 10.4 million sq ft of offi ce absorption totaling to about 19.2 million sq ft YTD. Offi ce absorption numbers recorded 18% increase qoq.The growth was underpinned by positive economic data; despite a dip in Business confi dence index, which stood at 43.8 in April GDP for Q4 2015 (Jan – Mar 2016) was recorded at 7.9%, an increase of 0.3% qoq. WPI infl ation was recorded in the positive territory at 0.79 %.

Technology, BFSI and Manufacturing fi rms dominated expansion activities across all cities. Bengaluru remained the top contributor with 30% share of the absorption pie followed by NCR (21%), Hyderabad (20%), Chennai (15%), Mumbai (8%), Pune (5%) and Kolkata (1%). Few notable transactions include expansion by TCS, leasing over 4,00,000 sq ft in Noida and 3,75,000 sq ft in Bengaluru. IBM and Value Labs have expanded their footprint in Hyderabad by leasing about 3,00,000 sq ft and 2,20,000 sq ft respectively in Western suburbs. Noida established its position as an Electronic manufacturing hub with leading mobile manufacturers like Vivo Mobile and Oppo Mobile taking up 2,50,000 and 1,60,000 sq ft of offi ce space respectively.

The demand was well supplemented by the new supply and existing vacant stock, but vacancy levels have gone down in most of the cities due to limited addition of new supply. This

Indicators Q2 2015 Q2 2016Gross Domestic Product 7.50% 7.90%

Business Confi dence Index 56.40% 43.80%

Repo Rate 6.75% 6.50%

Reverse Repo Rate 5.75% 6.00%

Cash Reserve Ratio 4.00% 4.00%Infl ation (WPI)2

-0.91% 0.79%

Prime Lending Rate 9.70% - 10% 9.70% - 10%

Deposit Rate37.75% - 8% 7% - 7.75%

Source: Government of India, Colliers International India Research

5 Research & Forecast Report | July 2016 | <<India>> | Colliers International

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quarter about 7.0 million sq ft was added to India’s total grade A office inventory.

Rentals for Grade A buildings remained stable in majority of micro markets. Bengaluru, Hyderabad and Pune experienced an upward trajectory with 3-6% qoq average growth while Gurgaon, Noida, Delhi and Mumbai remained stable in terms of rents. Across cities, there a was high demand for Grade A office spaces in SBD areas. The micro markets which have recorded highest qoq rental appreciation across cities were CBD and Outer Ring Road in Bengaluru, Hadapsar/Fursungi in Pune and SBD in Hyderabad. Though steady numbers were recorded for Grade A capital values in most cities, an upward trend was also observed in Bengaluru, Noida, and Mumbai across a few micro markets.

Now that the political uncertainty has dissolved, Hyderabad is an up and coming market to watch out for as several leading companies especially in the IT/ITeS sector are looking at Hyderbad as a preferred destination. Bangalore and Mumbai markets are expected to act as frontrunners on the supply side owing to expected completion of several new anticipated projects in coming quarters.

Colliers View

Slight expansion in business activity was recorded as seasonally adjusted Nikkei India Services Business Activity Index contracted by 5% and was registered at 51.0 in May 2016. Increased input costs contributed to the softer growth rate recorded in manufacturing production and services activity.There are other concerns over the uncertainty in direction of monetary policy on account of recent change in leadership at RBI and international happenings such as BREXIT. Although the UK exit from EU was unexpected and is affecting most global markets, in our opinion impact on the business outlook in India will be miniscule. Global investors are skeptical about reforms in China and Japan, but India will remain an emerging economy for potential investors. The Real Estate (Regulation and Development) Bill that was introduced in 2013 got President’s clearance on 25 March 2016 and as per Gazette Notification, Real Estate (Regulation and Development) Act (RERA) came into force from 1 May 2016. We expect that RERA will bring about much awaited discipline in the real estate sector affecting micro markets across India.

Owing to these results we ought to alter our strong outlook for office market a little and expect marginal improvement in leasing activities for rest of the year. New supply is likely to remain restricted in most of the cities which will put an upward pressure on asking rents in preferred micro markets. Bengaluru will continue to lead the overall absorption but cities like Hyderabad, NOIDA will continue to outpace other Tier I cities due to affordable rents and availability of Grade A supply.

Source: Government of India, Colliers International India Research

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*Indicative Grade A rentals in INR per sq ft per month**Nariman Point, Ballard Estate and Fort

MICRO MARKETS RENTALVALUE*

% CHANGEQOQ YOY

CBD** 200 - 250 0% 0%

Worli/Prabhadevi 180 - 210 0% -5%

Lower Parel 145 - 190 0% 0%

BKC 225 - 320 0% 0%

Kalina 150 - 220 0% 0%

Goregaon / JVLR 120 - 140 0% 24%

Andheri East 90 - 130 0% 5%

Malad 80 - 100 0% 0%

Powai 120 - 130 0% 0%

Navi Mumbai 70 - 100 0% 6%

Thane / LBS 60 - 75 0% 0%

Rental Values

Mumbai Offi ce Inventory geared up with new completions With about 1.8 million sq ft of new supply added in Q2 2016, rents are likely to remain stable in coming quarters

Mumbai offi ce absorption at 0.71 million sq ft has witnessed a downward spiral with a 23% decrease in total absorption since Q1 2016 as mostly mid-sized transactions have occurred in Q2 2016 . Th e average deal size was about 14,000 sq ft this quarter, showing a decrease of 36% since last quarter.

IT/ITeS, Engineering & Manufacturing and BFSI remained primary drivers of this demand with 25%, 23% and 23% share respectively. Location wise, about 38% of transactions were concluded in western suburbs followed by Central suburbs (24%), Central Mumbai (16%) and Navi Mumbai (14%). With a number of small and mid-sized transactions, Andheri remained the most active micro market this quarter.

Around 10.5 million sq ft of Grade A supply is available for fi t-outs in the Mumbai offi ce market. Navi Mumbai and BKC contributed about 24% each in this supply, trailed by Western suburbs (21%) in Andheri, Goregaon, Malad and Kalina, followed by Central locations (24%) in Lower Parel, Worli, Prabhadevi, Powai, then Th ane (5%) and CBD (2%).

About 1.8 million sq ft of grade A new supply was added to the city inventory. Projects completed this quarter include Art Guild House (0.8 million sq ft) by Phoenix Market City at

Source: Colliers International India Research


Mumbai | Offi ceJuly 2016


INDICATORS Q4 2015 Q1 2016 Q2 2016 Q3 2016F

Vacancy

Absorption

Construction

Rental Value

Capital Value

City Offi ce Barometer


Key under construction projects

Notes: 1. Offi ce Market: The major business locations in Mumbai are the CBD (Nariman Point, Fort and Ballard Estate), Central Mumbai (Worli, Lower Parel and Parel), Bandra Kurla Complex (BKC) and Andheri Kurla stretch. Powai, Malad and Vashi are the preferred IT/ITES destinations, while Airoli at Navi Mumbai and Lal Bahadur Shastri Marg are emerging as new offi ce and IT/ITeS submakets. 2. Rents/Capital Value: Market average of indicative asking price for Grade A offi ce space.3. Available Supply: Total Grade A offi ce space being marketed for sale or lease in surveyed quarter.4. City Barometer: Represents increase, decrease or stable scenario; as compared to previous quarter.5. All fi gures in the report are based on market information as on 25th June 2016.

CLIENT BUILDING NAME AREA (sq ft) LOCATION LEASE / SALE

Here Solutions Gigaplex 65,000 Airoli Lease

Siemens Birla Aurora 60,000 Worli Lease

Zee Empire Park 54,000 Vikhroli Lease

Learning Mate Dee Gee IT Park 45,000 Andheri MIDC Lease

Spykar Lotus Corporate Park 27,000 Goregaon East Lease

BUILDING NAME DEVELOPER AREA (sq ft) LOCATION POSSESSIONSeawoods Grand Central Tower I & II L&T Infrastructure 1,350,000 Navi Mumbai 2018

Kanakia Wall Street Kanakia 1,000,000 Andheri East 2018

Top 5 Transactions of Q2 2016


Kurla, K-Raheja Corp Building (0.3 million sq ft) by K-Raheja Corp and Boomerang (0.1 million sq ft) by Kanakia Spaces both at Andheri, Century Greenspan (0.4 million sq ft) by Century Estates at Worli and L&T Technology Center-IV (0.2 million sq ft) by L&T Realty at Powai.

Th ere was only one new launch this quarter, L&T Technology Center-V admeasuring 0.5 million sq ft; it is expected to be completed by 2017. Apart from this, K Raheja Corp is also planning to invest INR 2,000 crore in acquiring land and building 6 million sq ft of commercial space in the next two-and-a-half years in Navi Mumbai.

Rental values remained stable in Q2 2016 in all micro-markets mirroring the pattern in previous quarters. However, a signifi cant increase was observed in Goregaon/JVLR, Andheri East and Navi Mumbai since last year. Th is change can be attributed to the limited supply and preference for these micro-markets among occupiers. Rental values also declined in Worli/Prabhadevi since last year due to limited demand in this micro-market.

Colliers View

We expect absorption to gain momentum looking at the current RFPs fl oating in the market. However, demand will be driven by Non-IT sectors. With new supply being introduced in the market, rents are likely to remain stable in the upcoming quarters with minor changes in some micro-markets in Central locations. Sanction of the new Development Plan prepared by BMC is eagerly awaited as it talks about an increase in FSI to 2 in selected locations.

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Offi ce Absorption

Average Rental And Capital Value Trend

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CBD and Aero city witnessed maximum leasesSmall and mid-size transactions will dominate the offi ce demand; rents likely to remain stable

Th e second quarter of 2016 saw softer leasing demand for Grade A offi ce premises with total absorption recorded at 0.09 million sq ft down from 0.34 million sq ft in the last quarter. BFSI remained the leading driver of offi ce demand with over 52% share followed by IT/ITeS and Manufacturing companies taking up 20% share each. Connaught Place remained the most sought after location as about 48% of the total deals having taken place in this area. Small and mid-sized transactions kept the market alive with deal size averaging 8,000 sq ft. Besides this, Aero City emerged as the preferred destination with 31% share in total leasing activities. However, most of them were small sized transactions ranging from 2,000 to 18,000 sq ft.

Most prominent offi ce transactions of this quarter were lease of about 18,000 sq ft by Airtel and Power Finance Corporation each in Okhla and Connaught Place, respectively and 15,000 sq ft by Softbank in Bharti Worldmark located at Aero City.

Rents witnessed downward pressure in Nehru Place due to overall lower leasing transactions. Jasola, Saket, Netaji Subhash Place and Aero city recorded largely stable rents both on quarterly and annual basis. On the other hand, due to lack of investment sales, capital values have registered an average 10% decline with maximum dip recorded in areas of Jasola, Saket and Netaji Subhash Place.

About 1.4 million sq ft of Grade A offi ce stock was available for lease and fi t-outs this quarter. Th e city witnessed completion of two new Grade A projects in CBD area this


Delhi | Offi ceJuly 2016


Rental Values

*Indicative Grade A rentals in INR per sq ft per month**Connaught Place***Netaji Subhash Place


% CHANGEQOQ YOY

CBD** 180 - 450 0% 0%

Nehru Place 175 - 235 -5% -2%

Saket 130 - 200 0% 3%

Jasola 90 -130 0% 0%

NSP*** 70 - 120 0% 0%

Okhla 30 - 100 0% -1%



Vacancy

Absorption

Construction

Rental Value

Capital Value



quarter. Th ey were Redfort Capital Tower 2 by Parasvnath Developers at Bhaiveer Singh Marg with area of 85,000 sq ft and another commercial development at Shivaji Marg with a built up area over 2,00,000 sq ft. Also, two new projects were launched in the quarter with expected completion by 2017. Both these projects have a built up area of 40,000 sq ft each and are located at Okhla Phase III. Apart from this, another offi ce building admeasuring about 100,000 sq ft area in Mohan Cooperative area is under renovation and likely to see completion by the end of 2016.

In a move to boost the investor sentiments, the government is mulling plans to slash the circle rates in industrial areas of Udyog Nagar, Bawana and Narela which will help rationalize the gap between market rates and circle rates and revive interest among traders.

Colliers View

Overall rents are expected to remain stable in the short term. CBD and Aero city would remain the most preferred micro markets due to their location specifi c advantages. However, other micro markets such as Okhla and Netaji Subhash place will continue to garner interest of small and mid-size businesses looking to expand in Delhi at aff ordable rents.

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Power Finance Corporation Statesman House 18,000 Connaught Place Lease

Airtel Plot 249 18,000 Okhla Lease

Softbank Bharti Worldmark 15,000 Aero City Lease

Dalmia Narain Manjil 14,000 Connaught Place Lease

SBI Life Insurance Statesman House 8,500 Connaught Place Lease

BUILDING NAME DEVELOPER AREA (sq ft) LOCATION POSSESSION

NBCC Plaza NBCC Ltd. 1,300,000 Kidwai Nagar 2016

RPS Infi nia RPS Developer 1,200,000 Mathura Road 2016

Skipper House Govt. Trust 160,000 Barakhamba Road 2016



Notes: 1. Offi ce Market: The commercial areas in New Delhi can be broadly classifi ed into the CBD (Connaught Place), SBD Nehru Place, Bhikaji Cama Place, Netaji Subhash Place, Jasola and Saket .2. Rents/Capital Value: Market average of indicative asking price for Grade A offi ce space.3. Available Supply: Total Grade A offi ce space being marketed for sale or lease in surveyed quarter.4. City Barometer: Represents increase, decrease or stable scenario; as compared to previous quarter.5. All fi gures in the report are based on market information as on 25th June 2016.



Offi ce Absorption


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Leasing activity rebounded with 46% QoQ increase Rents are likely to remain stable with upward bias due to limited supply of quality space in preferred micro markets.

Gurgaon offi ce property market witnessed about 1.02 million sq ft of offi ce absorption this quarter, totaling to about 1.72 million sq ft YTD. On quarterly basis, this was about 46% increase. IT/ITeS and BFSI remained the key occupiers this quarter with about 32% and 25% share respectively in total lease volume. Apart from this, manufacturing and consulting fi rms looking to expand or enter the market, leased smaller offi ce spaces, which formed the bulk of transactions.

NH8 and Sohna Road remained the most preferred micro markets sharing about 32% and 24% of total offi ce absorption indicating an increased inclination towards cost eff ectiveness among corporate occupiers.

About 6.8 million sq ft of Grade A offi ce space was available for lease in Gurgaon this quarter. Nearly 27% of this available stock was located in NH8, 25% in Golf Course Extension Road and Sohna Road followed by 15% at Manesar and 11% at Golf Course Road. MG Road is left with limited vacant stock amounting to only 7% .

Only 0.65 million sq ft was added to the city’s total inventory this quarter. Two new projects with a scheduled completion by the fi rst quarter of 2018 have been launched at Golf Course Extension Road which include IREO City (1.5 million sq ft) and International Tech Park, Phase 1 (0.95 million sq ft). A small project Adipta Tower, with a built up area of 0.18 million sq ft was also launched in supply constrained micro


Gurgaon | Offi ceJuly 2016


Source: Colliers International India Research*Indicative Grade A rentals in INR per sq ft per month


% CHANGEQOQ YOY

MG Road 110 - 140 0% -4%

Golf Course Road 95 - 210 5% 22%

Institutional Sectors (Sec 44, 32, 18) 60 - 90 0% -3%

Golf Course Road Ext./Sohna Road 60 - 75 0% 8%

National Highway 8 50 - 130 0% 0%

Udyog Vihar & Industrial Sectors 30 - 45 0% 10%

Manesar 38 - 45 0% -2%

DLF Cyber City (IT) 100 - 110 0% 4%

Rental Values


Vacancy

Absorption

Construction

Rental Value

Capital Value



market of Udyog Vihar.

Rents remained stable in most of the micro markets with the only exception of Golf Course Road, that registered a 5.2% surge on quarterly basis. Capital Values have remained stagnant qoq.

In a move to align the prevailing ground realities and rejuvenate the buyer sentiments, the Haryana government slashed the circle rates by 15% which were held constant for the last two years. In another initiative, the district planning committee gave a green signal to the Transit Oriented Development Policy. Accordingly, the policy provided increased FAR upto 3.5 in the TOD zone, which shall be designated up to 800 meters width on both sides from the boundaries of the Right of Way (ROW) of MRTS corridor.

Colliers View

We anticipate demand momentum to continue from sectors like IT/ITeS, BFSI and Manufacturing. Due to connectivity enhancement, Golf Course Road will garner the occupier interest while traditional micro markets such as Udyog Vihar, Institutional Sectors and NH8 will continue to see transaction due to advantages in location and aff ordable rents. Rents are likely to remain stable with upward bias due to limited supply of quality space in preferred micro markets.

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Notes: 1. Offi ce Market: The prime business locations in Gurgaon are MG Road, Golf Course Road, Cyber City and Udyog Vihar. Manesar on the outskirts of Gurgaon is also emerging as the city’s new offi ce destination.2. Rents/Capital Value: Market average of indicative asking price for Grade A offi ce space.3. Available Supply: Total Grade A offi ce space being marketed for sale or lease in surveyed quarter.4. City Barometer: Represents increase, decrease or stable scenario; as compared to previous quarter.5. All fi gures in the report are based on market information as on 25th June 2016.


XL Catlin DLF Silokhera 150,000 DLF Silokhera Lease

Amazon Ambience Corporate Tower II 90,000 NH 8 Lease

Schnider Electric Individual Building 80,000 Sector 44 Lease

Data Telesis Brookfi eld SEZ 80,000 Tikri Lease

Guardian Insurance Brookfi eld SEZ 80,000 Tikri Lease




IREO City IREO 1,500,000 Golf Course Road Extn 2018

International Tech Park Phase 1 Ascendas 950,000 Golf Course Road Extn 2018

New Offi ce Development DLF 700,000 NH 8 2017




Offi ce Absorption


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Offi ce market remained alive with about 1 million sq ft offi ce absorption Leasing momentum to strengthen; Sector 62 and Noida Expressway will remain preferred locations on account of improved metro connectivity

Noida recorded signifi cant transaction volume with absorption being registered at about 1.0 million sq ft in Q2 totaling to YTD fi gure of 1.4 million sq ft. Demand largely remained concentrated in IT developments and manufacturing setups in Institutional and Industrial sectors. About 45% of transactions were concluded in Sector 62 followed by 30% in Industrial Sectors like Sector 63 and Sector 58 and 25% on Expressway indicating increased inclination towards aff ordable spaces by corporate occupiers.

Noida is witnessing increased attention from electronics manufacturing companies and is gradually ensconcing itself as the Manufacturing hub. Th is quarter, Vivo Mobile has leased 0.25 million sq ft area in World Trade Centre which is an R&D and manufacturing facility at Greater Noida. Oppo Mobile and Lava Mobile have leased 0.16 and 0.10 million sq ft in Sector 63. Noida is already home to leading vendors like LG, Samsung, Spice, Karbonn and has evinced interest from companies like Salcomp, a mobile phone charger maker. Companies like to remain in the vicinity of other vendors to leverage common component suppliers and economies of scale.

Th is quarter witnessed the launch of a few new projects on Noida Expressway with scheduled completion by 2019.


NOIDA | Offi ceJuly 2016


Indicative Grade A rentals in INR per sq ft per month*Sector 18**Sector 16A, 62, 125-142***Sector 124, 57-60, 63-75


% CHANGEQOQ YOY

Commercial Sectors* 70 - 110 0% -10%

Institutional Sectors (Non IT)** 80 - 100 0% 6%

Institutional Sectors (IT)** 40 - 55 -10% -14%

Industrial Sector (IT)*** 35 - 55 0% 0%

Rental Values



Vacancy

Absorption

Construction

Rental Value

Capital Value



Alphathum by Bhutani Infra, is an integrated development spread across 25 acres in the prime location of Sector 90. Antriksh India Complex, launched in a low density region of Sector 150 with FSI of 1.5 off ers both offi ce and retail spaces. Advant Solaris/Navis with 3.3 million sq ft area was launched in Sector 142 on Noida Expressway.

Increased transaction activity in IT and Manufacturing sectors, resulted in tightening in vacancy with overall vacant stock available for fi t out recorded at 8.5 million sq ft down by 25% on quarterly basis. About 0.2 million sq ft was added to the stock with completion of ATS Towers in Sector 135 of Noida Expressway.

Rents in largely remained stable in most of the micro markets. However, tightening of vacancy levels particularly in the Industrial Sectors of Noida resulted in a slight upsurge in rents qoq.

Colliers View

With favorable incentives for IT and Manufacturing units in place, and work on infrastructure projects like Metro Rail in Sector 62 and Noida Expressway in good progress, upswing in leasing activity will continue to persist in the short term. On account of its aff ordable rents, Industrial Sectors in Noida will continue to witness demand putting an upward bias on rents. Increasing supply side competition in Noida Expressway will weigh down on rents in this region.

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Forecast

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2009

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F

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F

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F

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F


Notes: 1. Offi ce Market: NOIDA market is comprised of sectors broadly classifi ed as institutional, industrial and commercial sectors. Institutional sectors include sec 16A, 62 and 125-142, industrial sectors include Sec 1-9, 57-60 and 63- 65 while sector 18 is the most developed commercial sector.2. Rents/Capital Value: Market average of indicative asking price for Grade A offi ce space.3. Available Supply: Total Grade A offi ce space being marketed for sale or lease in surveyed quarter.4. City Barometer: Represents increase, decrease or stable scenario; as compared to previous quarter.5. All fi gures in the report are based on market information as on 25th June 2016.


TCS Okaya Tower 400,000 Sector 62 Lease

Vivo Mobile World Trade Center 250,000 Greater Noida Lease

Oppo Mobile ASF Synergy 160,000 Sector 63 Lease

Lava Mobile Sector 63 100,000 Sector 63 Lease

Indus Tower Okaya Tower 25,000 Sector 62 Lease




Assotech Business Cresterra Assotech 500,000 Greater Noida Expressway 2017

World One CBS International Projects Pvt. Ltd. 100,000 Sector 90 2017



Offi ce Absorption


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Q2 2016 recorded robust demand and supply scenarioORR loses share in overall leasing activity while Whitefi eld and North Bengaluru picked up; rents are likely to inch up in coming quarters

In Q2 2016, Bengaluru’s total offi ce sector leasing stood at 3.6 million sq ft registering a hefty appreciation on the back of continued demand momentum across major sectors. In line with the trend witnessed in Q1 2016, IT/ITeS sector accounted for a majority share (71%) in the overall leasing followed by BFSI (17%).

As per our earlier predictions, due to a dearth of vacant spaces on Outer Ring Road, the leasing has slowed down in this micro market and accounted for only 20% of the total absorption this quarter. EPIP Zone/Whitefi eld and North Bengaluru were the primary benefi ciary of this spill over demand and garnered about 12% and 11% share respectively in total leasing this quarter. Signifi cant tenants that leased space in North Bengaluru included Apple India Pvt. Ltd. And Comviva leasing about 38,000 sq ft and 85,000 sq ft respectively.

Apart from leasing, we have also recorded couple of sales transactions this quarter. Th e most prominent one includes the purchase of 120,000 sq ft offi ce space by E Clinical Research Centre in Whitefi eld. Healthy demand was well complimented by robust supply and about 2.5 million sq ft of grade A offi ce space was added to city’s inventory in Q2 2016 registering a 30% appreciation on a quarterly basis.Substantial new supply was concentrated in peripheral micro markets of Sarjapur Road and EPIP Zone/Whitefi eld. IT-SEZs constituted 76% of the total new supply this quarter as one project each became operational in both Sarjapur Road (1 million sq ft) and EPIP Zone/Whitefi eld (0.54


Bengaluru | Offi ceJuly 2016


Source: Colliers International India Research*Indicative Grade A rentals in INR per sq ft per month


% CHANGEQOQ YOY

CBD 90 - 150 9% 9%

Outer Ring Road (Sarjapur - Marathahalli) 75 - 80 9% 30%

Outer Ring Road (K.R. Puram - Hebbal) 65- 75 8% 24%

Bannerghatta Road 55 - 68 3% 3%

Hosur Road 25 - 40 2% 2%

EPIP Zone/Whitefi eld 32 - 38 9% 9%

Electronic City 28 - 36 0% 0%

Rental Values


Vacancy

Absorption

Construction

Rental Value

Capital Value



million sq ft).

Buoyed by steady demand from IT/ITeS occupiers, all new launches in this quarter comprised of IT Parks and IT-SEZs. Nearly 3.5 million sq ft new space was launched, out of which 70% was in North Bengaluru locations such as Yelahanka and Th anisandra Road.

Despite healthy demand supply equation, most of the micro markets recorded rental appreciation this quarter. CBD, EPIP Zone/Whitefi eld and Outer Ring Road witnessed 7-9% qoq appreciation as demand continued to outpace supply. Capital values largely remained stable in most of the markets except EPIP Zone/Whitefi eld.

Colliers ViewWe expect leasing momentum to continue in coming quarters. However, despite being a preferred location, ORR will continue to lose its share in total leasing activity, while other micro markets such as Whitefi eld, North Bengaluru and Sarjapur Road will see maximum leasing due to availability of vacant stock and relatively aff ordable rents. Overall rental values are likely to inch up further due to limited supply in almost all preferred micro markets.

6,000

8,000

10,000

4,000

2,000

0

70

90

80

60

50

40

30

10

20

0

4.002.00

6.008.00

10.0012.0014.0016.00

0.00

Forecast

Q4 Q3 Q2 Q1

Q2

2008

Q2

2009

Q2

2010

Q2

2011

Q2

2012

Q2

2013

Q2

2014

Q2

2015

Q2

2016

Q2

2017

F

Q2

2019

F

Q2

2018

F

Notes: 1. Offi ce Market: Prime offi ce properties in Bengaluru can be divided into three principal sub-market— CBD/Off CBD (MG Road, Millers Road, Vittal Mallya Road etc.) the SBD (Banerghatta Road & Outer Ring Road (ORR) and PBD (Hosur Road, EPIP Zone, Electronic City and Whitefi eld).2. Rents/Capital Value: Market average of indicative asking price for Grade A offi ce space.3. Available Supply: Total Grade A offi ce space being marketed for sale or lease in surveyed quarter.4. City Barometer: Represents increase, decrease or stable scenario; as compared to previous quarter.5. All fi gures in the report are based on market information as on 25th June 2016.


Tata Consultancy Services Brigade Bhuwalka Icon 375,000 Whitefi eld Lease

Broadridge Financial Solutions Divyasree NR Enclave 156,000 Whitefi eld Lease

Infosys Karle IT Park 150,000 Outer Ring Road Lease

Ingersoll Rand IBC Knowledge Park 120,000 Bannerghatta Road Lease

Google Bagmane Constellation IT Park 105,000 Outer Ring Road Lease


Embassy Tech Village Embassy Group 2,900,000 Outer Ring Road 2018

Prestige Technostar Prestige Group 1,050,000 Whitefi eld 2018

Bagmane Constellation - Block Carina Bagmane Group 1,100,000 Outer Ring Road 2017




2010 2011 2015201420132012 2016



Offi ce Absorption


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ion

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Demand revival leads to highest leasing in three consecutive quartersOccupier preference to remain concentrated in OMR Pre-Toll and CBD; leading to upward pressure on rentals in these micro markets

During Q2 2016, Chennai witnessed substantial gross leasing of nearly 1.3 million sq ft as the commercial offi ce sector rebounded post state elections recently. Th is is primarily due to stable macroeconomic fundamentals coupled with pent-up demand which led occupiers to execute expansion strategies in the city.

OMR Pre - Toll remained the most preferred micro market and accounted for 43% share in total leasing volume followed by CBD and Mount Poonamalle Road sharing 21% and 17% respectively.

IT/ITeS sector continued to remain the catalyst behind increased leasing volumes accounting for 73% of total demand followed by BFSI which had a 7% share. IBM, Ford, Athena Healthcare and BNP Paribas are major tenants who leased spaces in this quarter. Apart from leasing, this quarter also witnessed a a notable sales transaction as Mysys brought 30,000 sq ft and 13,000 sq ft space in ASV Chandilya located at OMR Post-Toll.

In Q2 2016, the city witnessed minimal new supply infusion of about 0.2 million sq ft, out of which 70% became


Chennai | Offi ceJuly 2016

*Indicative Grade A rentals in INR per sq ft per month Source: Colliers International India Research



% CHANGEQOQ YOY

CBD 65 - 85 0% 3%

Off CBD 55 - 65 4% 9%

Ambattur 30 - 40 3% 21%

OMR (Pre Toll) 55 - 65 2% 9%

OMR (Post Toll) 25 - 40 0% 0%

Mount Poonamalle Road 50 - 60 0% 0%

GST Road 35 - 45 0% 0%

Rental Values


Vacancy

Absorption

Construction

Rental Value

Capital Value



operational in CBD itself. For the sixth consecutive quarter, new IT-SEZ supply remained absent in the city pushing occupiers to consider alternate options, including OMR Post-Toll and even in non IT spaces in central city areas.

Capital values and rents largely remained stable in this quarter. However, OMR Pre-Toll, Ambattur and Off CBD noted 2-4% marginal rental uptick over the previous quarter as vacancy dipped and no new supply entered these micro markets.

Colliers View

We expect, demand momentum to remain upbeat over the coming quarters due to positive occupier sentiments and a number of RFPs fl oating in the market. Also, planned IT-SEZ supply set for completion in the next two years is eagerly awaited by corporates looking at establishing or expanding presence in Chennai. Rents are expected to further appreciate in OMR Pre-Toll and CBD micro markets due to limited supply availability and occupier preference for these micro markets.

1

2

3

4

5

6

02010 2011 2012 2013 2014 2015 2016

Q4 Q3 Q2 Q1

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7,000

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9,000

5,000

4,000

3,000

2,000

1,000

0

90

70

60

80

50

40

10

30

20

0

Forecast

Q2

2008

Q2

2009

Q2

2010

Q2

2011

Q2

2012

Q2

2013

Q2

2014

Q2

2015

Q2

2016

Q2

2017

F

Q2

2018

F

Q2

2019

F

Notes: 1. Offi ce Market: Prime offi ce properties in Chennai are located in seven principal sub markets: CBD, Off CBD, Ambattur, OMR I, II & III, Mount-Poonamallee Road, GST Road.2. Rents/Capital Value: Market average of indicative asking price for Grade A offi ce space.3. Available Supply: Total Grade A offi ce space being marketed for sale or lease in surveyed quarter.4. City Barometer: Represents increase, decrease or stable scenario; as compared to previous quarter.5. All the fi gures in the report is based on market information as on 25th June 2016.


IBM DLF Cybercity 57,000 Mount Poonamalle Road Lease

Athena Health SP Info City 52,000 Old Mahabalipuram Road Lease

Ford SP Info City 52,000 Old Mahabalipuram Road Lease

Caibre Point Chennai One Magnum 45,000 Old Mahabalipuram Road Lease

BNP Paribas SP Info City 45,000 Old Mahabalipuram Road Lease


Chennai One SEZ - South Block IG3 Infra Ltd. 1,200,000 Pallavaram Thoraipakkam Road 2016

Ramanujan IT City (Cambridge Block) TRIL 750,000 Taramani 2016

Ramanujan IT City (Infi nity Block) TRIL 550,000 Taramani 2016






Offi ce Absorption


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Rents surging up in the wake of limited new supply Vacancy rate is at an all time low; restricted future pipeline for offi ce supply will push the rents upward in short to medium term.

Keeping up with trends in previous quarters, IT/ITeS sector was a frontrunner in the Pune offi ce market scene with 56% share in overall leasing volume followed by BFSI (22%), Engineering & Manufacturing (11%) and others (11%). Th e city absorption was about 51% lower in Q2 2016 when compared to last quarter. Th e total offi ce absorption recorded this quarter was 0.6 million sq ft totalling to 1.8 million sq ft YTD. Th e decrease in offi ce absorption on QoQ basis was primarily due to a few big transactions concluded in Q1 2016.

Kharadi, Hinjewadi and CBD locations were primary preferences among offi ce occupiers with 21%, 20% and 15% share respectively. Th ese were followed by Airport Road/Pune Station (14%), Bavdhan (8%), Kalyani Nagar (7%), Hadapsar/Fursungi (5%), Nagar Road (5%), Baner and Aundh (5%).

Notable transactions this quarter include Citibank which leased about 80,000 sq ft of offi ce space in the SEZ EON Cluster – E at Kharadi. Fiserv took about 33,000 sq ft in Kumar Cerebrum IT Park 2 at Kalyani Nagar and other transactions were concluded by Innoplexus and Msys Technologies which secured 28,000 sq ft each in Midas Tower at Hinjewadi.

Offi ce space stock of over 3.7 million sq ft is available in


Pune | Offi ceJuly 2016



*Indicative Grade A rentals in INR per sq ft per month


% CHANGEQOQ YOY

Baner 50 - 60 3% 10%

Bund Garden 53 - 67 3% 4%

Airport road/pune station 56 - 87 2% 12%

Aundh 50 - 64 4% 9%

Senapati Bapat Road 65 - 110 6% 25%

Bavdhan 39 - 50 3% 11%

Kalyani Nagar 52 - 65 4% 9%

Nagar Road 52 - 65 4% 11%

Hinjewadi 42 - 55 5% 13%

Hadapsar/Fursungi 55 - 72 9% 23%

Kharadi 48 - 90 6% 22%

Rental Values


Vacancy

Absorption

Construction

Rental Value

Capital Value



Pune market as of Q2 2016. Around 26% of this stock is at Pune’s IT hub, Hinjewadi followed by 15% at Airport road/Pune station, 13%, 11% and 10% at Nagar Road, Bund Garden and Kharadi respectively, while 26% was available in other locations.

New supply remained restricted and only a small development Power One admeasuring 0.03 million sq ft by Spara Properties at Mudhwa witnessed completion. Similarly, a few small new projects were launched this quarter totaling to about 0.21 million sq ft. Sai Square at JM Road, SBH at Wakad and Global Business Hub at Kharadi are to be completed in the next 1-2 years.

Limited supply and continued dip in vacancy levels have led to a signifi cant increase in rental values across all micro markets in Pune, with Hadapsar/Fursungi leading the way with a 9% increase since last quarter.

Colliers View

Pune market has experienced a supply crunch and rent escalation for past few quarters. In long run limited supply pipeline and continued escalation in rentals has the potential to decrease the overall attractiveness of the city for IT majors and other large occupiers. Th us rents will continue to rise for a short term but will stabilize within most micro markets in longer term. Th e recent launch of 14 smart city projects in Pune will trigger rapid development leading to an increased demand across commercial markets, however city will need new supply to adhere to this demand.

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2,000

1,000

0

80

70

60

50

20

10

40

30

0

1

2

3

4

5

6

0

Forecast

2010 2011 2012 2013 2014 2015 2016

Q4 Q3 Q2 Q1

Q2

2008

Q2

2009

Q2

2010

Q2

2011

Q2

2012

Q2

2013

Q2

2014

Q2

2015

Q2

2016

Q2

2017

F

Q2

2019

F

Q2

2018

F


Notes: 1. Offi ce Market: The prime offi ce sub-markets of Pune include CBD (Deccan Gymkhana, Bund Garden Road, Senapati Bapat Road & Camp), Off CBD (Aundh, Airport Road and Kalyani Nagar) and the eastern corridor, along with Nagar Road and Kharadi, which have emerged as a preferred location for fi nancial and IT/ITES companies.2. Rents/Capital Value: Market average of indicative asking price for Grade A offi ce space.3. Available Supply: Total Grade A offi ce space being marketed for sale or lease in surveyed quarter.4. City Barometer: Represents increase, decrease or stable scenario; as compared to previous quarter.5. All fi gures in the report are based on market information as on 25th June 2016.


Citi Bank EON Cluster – E 80,000 Kharadi Lease

Fiserv Kumar Cerebrum IT Park 2 33,000 Kalyani Nagar Lease

Innoplexus Midas Tower 28,000 Hinjewadi Lease

MSys Technologies Midas Tower 28,000 Hinjewadi Lease

True Connect Suzlon 25,000 Kharadi Lease


Global Business Hub Shubh Developers 100,000 Kharadi 2018

SBH Chordia Group 100,000 Wakad 2017

Sai Square Jalan Group 10,000 JM Road 2017





Offi ce Absorption


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Healthy leasing by Technology fi rms increased offi ce absorption 50% QoQDemand to strengthen further in coming quarters; rents to see upward trends in SBD as demand likely to outstrip supply

During Q2 2016, Hyderabad witnessed about 1.9 million sq ft total absorption across the city. Widespread expansion coupled with entry of new companies brought about vigorous qoq appreciation of 54% in overall leasing volumes. Prominent tenants such as IBM leased nearly 300,000 sq ft in Phoenix Avances in HITEC City. Value Labs also took up almost 220,000 sq ft in Lanco Hills in Manikonda.

New age technology driven data analytics and Internet of Th ings (IoT) companies were the prime demand driver and accounted for about 76% of the overall leasing share. HITEC City remained the preferred micro market with 85% share in total leasing volume due to presence of several IT Parks and IT-SEZs.

Apart from SBD, Central Business District (CBD) also commanded a 12% share in total leasing volume as some companies across IT/ITeS, Media and BFSI with mid-sized space requirements continued to prefer CBD due to ease of connectivity and proximity to other business hubs.

Since SBD has traditionally witnessed maximum share in overall leasing, most of the upcoming supply is concentrated in locations within this micro market. Th is quarter, too, we


Hyderabad | Offi ceJuly 2016

Rental Values

*Indicative Grade A rentals in INR per sq ft per month




% CHANGEQOQ YOY

CBD 45 - 50 -4% -4%

Off CBD 45 - 50 -9% -13%

SBD 50 - 55 10% 18%

PBD 25 - 30 0% 0%

Rental Values


INDICATORS Q1 2016 Q2 2016 Q3 2016F

Vacancy

Absorption

Construction

Rental Value

Capital Value



noted new supply infl ux of 1.1 million sq ft in Raidurgam and Nanakramguda which is 19% higher compared to the last quarter. While the entire supply comprises of IT-SEZ spaces, Grade A spaces account for 88% of the total supply.

As vacancy levels are consistently decreasing in HITEC City, developers have started planning new projects in areas around HITEC City. In Q2 2016, three new projects comprising a total of 4.7 million sq ft were launched, out of which 85% will be concentrated in Nanakramguda and Raidurgam. Th ese new projects are expected to become operational by December 2018.

High demand for prime offi ce spaces in SBD led to a 10% qoq rental appreciation in this micro markets. Rents in CBD decreased by 4% due to lack of grade A spaces.

Colliers View

We expect leasing volumes to strengthen in the second half of the year as a stable political climate and incentives provided by state government will help propel Hyderabad’s image as a leading center for innovation and design for IT/ITeS companies. SBD will continue to remain the preferred micro market amongst occupiers. While new supply of nearly 1.2 million sq ft is likely to see completion in SBD in Q3 2016, rents may still appreciate further in this micro market due to a steady demand.

40

30

20

10

0

2010 20122011 2013 2014 2015 2016Q4 Q3 Q2 Q1

Q2

2011

Q2

2012

Q2

2013

Q2

2014

Q2

2015

Q2

2017

F

Q2

2016

F

Q2

2018

F

Q2

2019

F


0

1

2

3

4

5

6

7

Notes: 1. Offi ce Market: The prime offi ce sub markets of Hyderabad include CBD (Banjara Hills Road No. 1,2, 10 and 12), Off CBD (Begumpet, Somajiguda, Raj Bhavan Road, S.P. Road, Himayath Nagar, Off Banjara Hills and Jubilee Hills), SBD (Madhapur, Gachibowli, Manikonda, Kondapur, Nanakramguda) and PBD (Pocharam, Uppal and Shamshabad)2. Rents/Capital Value: Market average of indicative asking price for Grade A offi ce space.3. Available Supply: Total Grade A offi ce space being marketed for sale or lease in surveyed quarter.4. City Barometer: Represents increase, decrease or stable scenario; as compared to previous quarter.5. All fi gures in the report are based on market information as on 25th June 2016.


IBM Avances Business Hub 300,000 HITEC City Lease

Value Labs Lanco Hills 220,000 Manikonda Lease

Development Bank of Singapore Wave Rock 148,000 Nanakramguda Lease

HDFC Bank Roxana Palladium 100,000 Banjara Hills No.1 Lease

DE Shaw Raheja Mindspace 87,000 HITEC City Lease


My Home Divija My Home Group 3,000,000 Raidurg 2018

Knowledge City Salarpuria Sattva 1,540,000 Raidurg 2017

Laxmi Cyber Towers Gar Corp 1,000,000 Nanakramguda 2018



50

60Forecast



Offi ce Absorption

Average Rental Trend

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Offi ce market maintained status quo in Q2 2016Despite restricted supply in coming quarters, rents are likely to remain stable due to high vacancy levels

In the last two quarters, Kolkata market has seen marginal improvement in enquiries mostly into Non-IT segment for expansion requirements. However, with an average deal size of 7500 sq ft the overall leasing volume was unable to pick up this quarter as well. We recorded about 0.12 million sq ft of offi ce absorption this quarter totalling to about 0.3 million sq ft YTD. Sector V remained the occupier preference due to availability of grade A buildings and about 70% of the leasing took place in this location. Besides this, traditional CBD locations continued to see small transactions and shared about 17% in the total absorption pie. Most of the demand was catered to local companies looking for expansion.

One of the notable transactions this quarter includes Senrysa Technologies lease of 18,000 sq ft space in Godrej Watersode located at Sector V. Financial Services fi rms like Karvy Financial and Destimoney have leased about 14,000 sq ft each in CBD zone and Sector V, respectively. Besides this we have also witnessed couple of small outright purchase transactions in a few recently completed grade A buildings.

No major commercial project witnessed completion this quarter. City level vacancy was recorded at 24% with IT Zones in the micro markets of Sector 5, New Town and Rajarghat witnessing high vacancy level of about 30% and East Kolkata registered a vacancy level of 15%. Over 90% of the vacant stock is available in Rajarhat, New Town and Sector V, however, in recent times these micro markets


Kolkata | Offi ceJuly 2016



*Indicative Grade A rentals in INR per sq ft per month**Park Street, Camac Street, Chowranghee Road, AJC Bose Road***EM Bypass, Topsia, Ruby****Salt Lake, New Town, Rajarhat


% CHANGEQOQ YOY

CBD** 85 - 115 0% 0%

SBD*** 60 - 70 -3% -7%

Sector V 40 - 45 -3% 0%

PBD **** 34 - 35 0% 0%

Rental Values


Vacancy

Absorption

Construction

Rental Value

Capital Value



witnessed a marginal decline in vacancy levels due to limited supply. In the coming quarters as well, supply will remain restricted apart from small offi ce supply in a few mixed use projects.

Rents and capital values in most of the micro markets remained largely unchanged however, a few buildings continued to demand premium over average market rents.

Th is quarter IT/ITeS major, Wipro had proposed to set up an IT/ITeS SEZ over an area of 19.76 hectares in Rajarhat, but is now rethinking its strategy of expanding its business on account of deferment on part of government in giving SEZ status to the project.

Colliers View

Looking at the current stage of construction, the market is unlikely to see any major new supply of commercial space in the remaining quarters of 2016. However, rents are likely to remain stable due to high vacancy level. In the backdrop of sluggish real estate market, unless the government adopts a more investor friendly approach the status quo is expected to continue.


Notes: 1. Offi ce Market: The major business locations in Kolkata are CBD (Park Street, Camac Street, Chowranghee Rd, AJC Bose Rd), East Kolkata (EM Bypass, Topsia, Ruby), Salt Lake/ Sector V and New Town / Rajarhat.2. Rents/Capital Value: Market average of indicative asking price for Grade A offi ce space.3. Available Supply: Total Grade A offi ce space being marketed for sale or lease in surveyed quarter.4. City Barometer: Represents increase, decrease or stable scenario; as compared to previous quarter.5. All fi gures in the report are based on market information as on 25th June 2016.


Senrysa Technologies Godrej Waterside 18,000 Sector V Lease

Karvy Financial Apeejay House 14,000 CBD Lease

Destimoney Sugam Business Park 14,000 Sector V Lease

MET Technologies Brookfi eld Infospace 11,000 Rajarhat Lease

ATO Engg. Srijan Corporate Park 10,700 Sector V Lease


Technopolis 2 Forum Projects 1,200,000 Bantala 2016

PS Srijan Tech Park II PS Group & Srijan 925,000 Sector V 2016

Primac Tower Primac Group 47,000 Sector V 2016



Rental Values Capital Values

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0.002010 2011 2012 2013 2014 2015 2016

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Q2

2014

Q2

2015

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2017

F

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F

Q2

2019

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Offi ce Absorption


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Copyright © 2016 Colliers International.

ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

About Colliers International Group Inc.Colliers International Group Inc. (NASDAQ: CIGI; TSX: CIG) is an industry leading global real estate services company with more than 16,000 skilled professionals operating in 66 countries. With an enterprising culture

occupiers, owners and investors worldwide. Services include strategic advice and execution for property

solutions; appraisal, valuation and tax consulting; customized research; and thought leadership consulting.

help clients accelerate their success. Colliers has been ranked among the tInternational Association of Outsourcing Professionals’ Global Outsourcing for 11 consecutive years, more

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554 66 countries on 6 continentsUnited States: 153 Canada: 34 Latin America: 24 Asia : 39 ANZ: 192 EMEA: 112

$2.5billion in annual revenue

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Primary Authors:

Surabhi Arora Senior Associate Director | Research +91 124 456 [email protected]

Divya Grover Senior Manager | Research

Uttara Nilawar Manager | Research

Parul BhargavaSenior Analyst | Research

Amit Oberoi I National DirectorValuation & Advisory Services & Research

Mumbai: George Mckay I South Asia [email protected]

Delhi / NCR: Vaibhav Mahurkar | [email protected]

Bengaluru: Goutam Chakraborty I Senior [email protected]

Hyderabad: Hari Prakash I Senior General [email protected]

Pune: Rishav Vij I Senior Associate [email protected]

Chennai: Shaju Thomas | Senior Associate Director [email protected]

Kolkata: Swapan Dutta I Senior Associate [email protected]

Colliers InternationalTechnopolis Building, 1st Floor, DLF Golf Course Road, Sector 54, Gurgaon - 122 002TEL +91 124 456 7500