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INDIA

CBRE RESEARCH Report | 2016

The star that shines


the brightest

Contents
06

08

12

16

24

25

28

30

04

Birth of a
Technology
Titan

Bangalore
Office
Market Key
Highlights

Emerging Trends
in Bangalores
Office Leasing
Markets

Intrinsic Strengths
that Drive Bangalore
as Indias Pivotal
Commercial Hub

Bangalores Leading
Office Nodes

Recommendations
for Occupiers and
Developers

Rebooting
Infrastructure
to Support the
Development Curve

Comparing
Corporate Hubs:
How do Bangalores
Office Hubs Stack up
against Each Other?

Market Outlook

Bangalore: A Macro View

City
Snapshot

Office Market Stats

Geographical spread

2,190 sq km

Bangalore leads commercial office stock among


top three tier-I cities in India

Bangalore remains Indias


3rd most populous city
and 5th most populous urban
agglomeration.

2015

(mn sq. ft.)

88

Bangalore Tops India Markets


in 2015 and 2014

Mumbai office space stock at

87

62

Absorption activity

Delhi NCR office space stock at

95

67

12.2 mn sq. ft. 2015 with 32% share;


11 mn sq. ft. in 2014 with 35% share

2015

9.6 mn

(mn sq. ft.)

Bangalore recorded office space


absorption of
Mumbai recorded office space
absorption of
Delhi NCR recorded office space
absorption of

6.5 mn
2021(P)

*Source: Census of India 2011, Population Projection for Karnataka 2012 2021 by Directorate of Economics and Statistics, Bangalore, 2013.

vs

2,377,305

INR 9,200.

87%

Population
Density
(population
per sq km)

Urban
Population

No. of
Households

Highest
per capita
Income in
India

Literacy
Rate

Leading
Industry

Aerospace
and Aviation

Biotechnology

Bangalore offers lowest prime rent among top three


tier-I cities in India 2015

58%
of (33 out of 58)
CMM (Capability
Maturity Model) Level
5 companies in India
are established in
Bangalore

Manufacturing

vs

2011

(INR/sq.ft./Month)

Rental
leaders

Prime rent in Bangalore stands at

108

95

Prime rent in Mumbai stands at

250

270

CBD, Whitefield : 12% (y-o-y)

Prime rent in Delhi NCR stands at

295

295

North Bangalore: 11% (y-o-y)

Outer Ring Road, EBD : 21% (y-o-y)

Drivers
Good
Connectivity

Bus Network

Operational
Metro

CBRE RESEARCH
This report was prepared by the CBRE India Research Team, which forms part of CBRE Researcha network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate.
CBRE Ltd. 2016 Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to
confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.
*The timeline are mentioned as per Calendar year beginning January to December

2011

(mn sq. ft.)

Advantages
IT/ITES

12.7 mn sq. ft. 2015 with 33% share;


12 million sq. ft in 2014 with 38% share

(INR/sq.ft./Month)

90.9%

Supply addition

12

2015

4,384

2011

(mn sq. ft.)

Bangalore attracts highest absorption of office


space among top three tier-I cities in India

14.2 mn

2011

vs

Outer Ring Road (ORR), Whitefield


and North Bangalore

127

Bangalore office space stock at

Population Stats

2001

Key
Commercial
Hubs

Social
Infrastructure

Politically Stable 3rd most


populous city
in India

Talent Pool

Bangalore The Star That Shines The Brightest| India

Birth of a
Technology
Titan
As Indias technology sector expands its horizons, Bangalore has emerged as a dominant
facilitating easy access to different nodes of the city, further
growth frontier offering the countrys new economy sectors such as information
stimulated office space demand in the city over the past few
technology, biotechnology, pharmaceuticals, manufacturing and other services sectors,
years. Persistent demand for office space from technology
a new growth paradigm. In the last two decades or so, Bangalore has transformed
firms spurred growth of commercial real estate market
from being a Pensioners Paradise to Indias Silicon Valley, becoming the hub of
in Bangalore, positioning it as one of the leading office
research and innovation. It started during the 1950s and 1960s, when Bangalore
destinations across the country. With completion of numerous
witnessed industrial transformation with the setting up of public sector enterprises
larger sized technology parks and special economic zones,
such as Hindustan Machine Tools (HMT) and Bharat Electronics Ltd. (BEL) and
Bangalores commercial office stock has grown exponentially
private sector enterprises such as MICO et al. During the early 1980s, the
from less than 20 million sq. ft. in early 2000s to 127 million
Karnataka State Electronics Development Corporation established an industrial
sq. ft. in 2015; a 13% (CAGR) growth over the last 15 years.
park known as Electronics City in the Southern outskirts of Bangalore. This was
This places the city well ahead of leading Indian office hubs
followed by the establishment of the Software Parks of India regime in the city
such as Delhi-NCR (National Capital Region) (90 million sq.
during the software boom in the 1990s, offering incentives to the still nascent
ft.), Mumbai (85 million sq. ft.) and other prominent Asian
IT industry to strengthen its base and evolve. Over the years, Bangalore
business hubs such as Singapore (56 million sq. ft.), Hong
witnessed the advent of its information technology sector with significant
Kong (73 million sq. ft.), Bangkok (13 million sq. ft.) and Kuala
investments flowing into the city mainly attributable to its intrinsic strengths
Lumpur (36 million sq. ft.).
such as a salubrious weather, pro-industry Government policies, presence
of prominent educational/science research institutions and abundant
skilled talent pool. The last factor being instrumental in attracting backIn recent times, flight to quality, rental arbitrage and availability
office operations and shared services platforms of global corporates into
of large scalability options have driven occupier interest
the city.
from the central locations of the city to more cost effective
commercial hubs in the suburban/peripheral areas of the city.
Consequently, in little over two decades, prominent corporates such
Marathahalli - Sarjapur Outer Ring Road (ORR), Whitefield, and
as CISCO, IBM, Microsoft, Cognizant, Sun Microsystems, Hewlett
peripheral locations of North Bangalore, have emerged as the
Packard, amongst others, have established a large footprint in
growth vectors for Bangalores commercial real estate market
the city; thereby driving the citys commercial office market. The
accounting for a dominant share of the citys commercial real
development of the International Tech Park in Western hub of
estate supply and absorption dynamics.
Whitefield in the late 90s, as a joint collaboration with the
Government of Singapore, further attracted prominent global
corporates such as SAP, Dell, Oracle, Shell, Aviva, GE, amongst
others.
Availability of good quality office spaces at affordable rentals,
presence of skilled manpower and improved connectivity

4|

CBRE RESEARCH

CBRE Ltd. 2016

|5

Intrinsic Strengths That Drive


Bangalore as Indias Pivotal
Commercial Hub

Strengths
Asia's fastest growing
cosmopolitan city, marked with
characteristic architectural landmarks,
shopping centers and business
opportunities. It was critical in attracting
multiple industries, making it an ideal
gateway to India and beyond15.

Fast Facts
Real estate and commerce
The Silicon Valley of India is home to both domestic and global technology companies. ~
Bengaluru has about 950 IT firms out of an overall count of 2,400 in India1.
Hub of fast growing nano-technology, bio-engineering, aerospace, electronics-related firms in
India2.
Establishment of the Export Promotion Industrial Park (EPIP) Zone in 1996 and International
Technology Park Ltd. (ITPL) in 1998 at Whitefield3.
Availability of high quality commercial spaces offered by majority of prominent developers,
customized to the needs of IT companies4.
Affordable office rents due to constant addition of high quality supply over the years (owing to
the fact that Bangalore is a circular city and has grown in all directions, unlike say Mumbai,
which has space constraint or Hyderabad, which has grown only in one pocket)5.
Quality residential developments across the spectrum, with affordable projects from prominent
developers across the city6.

tructure
ing and infras
Physical plann
Bangalore Metropolitan Region is spread over an area of 8,005 sq. km., including
the Bengaluru Metropolitan Area that is divided into 5 Area Planning Zones (APZ)
and 6 Interstitial Zones (IZ)7.
Multiple infrastructure initiatives under development to enhance connectivity and
drive real estate growth across the city8.
Peripheral Ring Road (PRR) will circumnavigate the city beyond the ORR, connecting
all major highways and arterial roads9.
Metro Phase-I is partially operational, expected to become ready by Q4 2016,
followed by Phase-II by 202110.

Source:
1. NASSCOM, Regional News Letter- South- June 2012 | 2. CBRE Research | 3. Secondary research | 4.CBRE and secondary research
5. CBRE and secondary research | 6. Secondary research | 7. CBRE Research | 8. CBRE Research, secondary research | 9. CBRE Research, secondary research
10. CBRE Research, secondary research | 11. http://www.dnaindia.com/bangalore/report-bangalore-a-mall-too-many-1880092, https://en.wikipedia.org/wiki/
List_of_schools_in_Bangalore | 12. Indian Journal of research, Paripex Mredical Tourism in India. Jan 2014 | 13. Federation of Hotel & Restaurant Associations
of India (FHRAI), Indian Hotel Industry Survey 2013-2014 | 14. ASSOCHAM Job Trends Across Cities & Sectors survey, 2013-14 FY - http://www.daijiworld.com/news/
news_disp.asp?n_id=195135

Social infrastructure and


human resource

Well-developed social infrastructure with a good network of


shopping centers (30 operational malls), entertainment theaters,
F&B outlets, schools, hospitals, etc11.
Select tertiary and quaternary healthcare establishments such as
Narayana Hrudayalaya, HCG Cancer Care, Manipal Hospital,
Colombia Asia Hospital, Apollo Hospital are fueling growth of
medical tourism. Bangalore attracted approximately 25% of
the total Foreign Tourist Arrivals (FTA) for medical treatment, at
approximately 10% FTA from January 2009 to January 201512.
Hospitality sector has improved significantly in the last couple
of years. FY 201314 saw the addition of 1,350 branded
rooms with an increase in occupancy over the previous year.
The future hospitality supply for Bangalore is estimated to grow
by approximately 7,000 hotel rooms over the next five years, of
which 66% is being actively developed 13.
The IT/ITeS and IT hardware sectors accounted for 67%
share of the total new employment opportunities generated in
Bangalore during FY 20131414.

Capital of Karnataka, Bangalore is well


connected with other parts of the state and
country via road, rail and air, along with
international flight connectivity options across
the globe16.
Bangalore is among the best cities to live
in India, it enjoys a more moderate (tropical
savanna) climate throughout the year17.
The Karnataka State Electronic Department
Corporation Limited (KEONICS) to promote
electronics industries. Phase 1 of the Electronic City
Industrial Park has been set-up18.
Favorable market for Foreign Direct Investors.
Bangalore ranked 4th by contributing nearly 6% to
cumulative FDI inflows in the country between April
2000 and January 201519.
Huge pool of skilled and technology savvy workforce
with the presence of top educational institutions such as
the Indian Institute of Science, National Institute of Design
(NID), Indian Institute of Management Bangalore (IIM-B)
etc20.
In the last two decades, many private sector and multi-national
companies have set up base in Bengalore, utilizing the citys
vast human resource availability. It has a large floating populace
owing to clustering of IT, biotech, aerospace, defense, nanotechnology and electronics industries and large public sector
enterprises that have attracted the best talent from across the
country21.

Utility infrastructure such as power, water and telecommunication


is good and adequate with challenges in select peripheral micromarkets22.
Source:
15. CBRE and seconday research | 16. CBRE Research, Secondary Research | 17. Source: Secondary Research
18. Karnataka State Electronics Development Corporation Limited | 19. Department of Industrial Policy and Promotion, India FDI January 2015
20. Secondary Research | 21. Karnataka Industrial Area Development Board, http://www.kiadb.in | 22. Karnataka Industrial Area Development
Board, http://www.kiadb.in

Bangalore The Star That Shines The Brightest| India

16
17

Rebooting
Infrastructure
to Support the
Development
Curve
Purple Line Extension - East (Proposed)1

Metro Reach II - Purple Line (West)

Purple Line Extension - West (Proposed)2

Metro Reach III - Green Line (North)


Green Line Extension - North (Proposed)3

Metro Reach IV - Green Line Under construction (South)

Green Line Extension - South (Proposed)4

Metro Phase - Under construction

10

Phase II - Red Line - Metro Link (Proposed)5

11

NICE Corridor

12

Elevated Airport Expressway

13

Proposed Peripheral Ring Road (PRR)

14

Bangalore Bio-innovation Centre (BBC)

15

Bio-tech park in south Bangalore

16

Devanahalli Business Park

17

BIAL - Aerotropolis

12

10
R in
gR
oad
(O
RR
)

4
7

8|

19

Aerospace SEZ

19

Phase II - Yellow Line - Metro Link (Planning)6

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(O

11

11

18

CBRE RESEARCH

R)

11

(OR
R)

13

Out
er R
ing
Roa
d

Metro Reach I - Purple Line (East)

ter
Ou

18

14
10

13
15

1. Extension to East Line (Baiyappanahalli to Whitefield) | 2. Extension to West Line (Mysore Road to Kengeri) | 3. Extension to North Line (Nagasandra to BIEC) | 4. Extension to
South Line (Puttenahalli to NICE Junction) | 5. Red Line (Nagawara to Gottigere) | 6. Yellow Line (RV Road interchange to Bommasandra)
LEGEND:
Airport Elevated Expressway

Peripheral Ring Road (PRR)

NICE corridor

Operational Metro Line

Proposed Metro Line

Under construction Metro Line

CBRE Ltd. 2016

|9

Bangalore The Star That Shines The Brightest| India

Namma Metro
The Bangalore Metro Rail project is aimed at connecting important hubs in the city through 32 stations
and two lines, with an estimated travel time of 33 minutes between terminal stations across the city.
Both phase I and II combined is expected to cover up all the major areas of the city to provide the much
required last mile connectivity.
Operational stretch:
Reach I Swami Vivekananda station, Trinity Circle, Ulsoor, Byappanahalli (operational since
October 2011).
Reach III Malleshwaram, Rajajinagar, Yeshwanthpur, Peenya (operational since March 2014).

Peripheral Ring Road (PRR)


The proposed 63.4 km expressway will connect Tumkur Road (North West) to Hosur Road (South) via
Bellary Road (North) and Old Madras Road (East). The 100 meter wide road with a 6-lane bi-directional
carriageway would integrate many national and state highways along its entire stretch in Bangalore. The
Bangalore Development Authority (BDA) has already finalized the Detailed Project Report (DPR) for the
project and construction is expected to begin shortly. Land acquisition for the road is currently underway.
Focus and impact on growth corridors: The PRR will be classified as an urban road and will
have high demand with increasing urbanization. As per Government planning, the PRR would ease off
traffic congestion and boost commercial activity along Tumkur Road, Bellary Road, Old Madras Road,
Sarjapur Road and Hosur Road.

Reach II Magadi Road, Vijayanagar, Mysore Road Terminal (operational since November 2015).
Under construction stretch:
Reach IV Jayanagar, R V Road Terminal, Puttenahalli (expected completion by Q4 2016.
Focus and impact on growth corridors: Areas including CMH Road (Indira Nagar), MG
Road, Malleshwaram, Ulsoor, Domlur, Byappanahalli, and others have witnessed residential capital
appreciation in the range of approximately 2030% since 2011. Going forward, the planned
development is expected to develop real estate and push up property prices across Yelahanka,
Hesarghatta, Puttenahalli, Jayanagar, Electronics City, BTM Layout and Nagavara.

NICE / BMIC Corridor


The NICE Corridor, implemented by Nandi Infrastructure Corridor Enterprises Limited, is a 4-6 lane
highway. Part of the prestigious Bangalore Mysore Infrastructure Corridor (BMIC) project. Conceptualized
by the Karnataka Government in the 1990s to provide seamless connectivity between Bangalore
and Mysore, the corridor comprises of 42 km Peripheral Road running across South West Bangalore
including Hosur Road, Banerghatta Road, Kanakpura Road and Tumkur Road, besides 9 km Link Road
connecting Outer Ring Road and Peripheral Road, with 12 km of the expressway extending beyond the
Link Road Peripheral Road intersection.
Focus and impact on growth corridors:The corridor is complete and has enhanced connectivity
between different nodes of the city. This stretch is expected to connect Bangalore City with Mysore
through an additional 111 km extended road. To enhance connectivity NICE Ltd. has also undertaken
development of seven interchanges on the Peripheral Road as part of the corridor project.

Airport Elevated Expressway


The elevated expressway (operational from December 2013) from Hebbal to Kempegowda International
Airport on NH-7 remains an asset for the citys commuters.
Focus and impact on growth corridors: Completion of the expressway has helped in easing
traffic congestion and reducing commuting time from Hebbal to the International Airport to just 20
minutes. The region has recorded ample commercial activity in locations such as Jakkur, Amrutahalli,
Sahakara Nagar and Devanahalli on the Bellary Road (North) in the last two years.

10 |

CBRE RESEARCH

Industrial Parks and Innovation


Centers
Bio-tech Park in South Bangalore: Spread across 53 acres in Electronic City, the biotech park,
Alexandria Knowledge Park, also called Helix, is expected to be an integrated project with laboratory,
technology and commercial spaces. The project proposes to offer infrastructure in line with global
standards and attract multi-nationals to set up their base in Bangalore.
Bangalore Bio-innovation Centre (BBC): The Centre is currently operational and offers world
class incubation spaces along with a central instrumentation facility over a 10 acre campus with a total
built-up area of 60,000 sq. ft. The project is supported by the Department of Biotechnology (DBT),
Government of India. The center is expected to support, boost and attract new start-ups.
BIAL (Aerotropolis): The Aerotropolis is expected to consist of various real estate components such
as commercial, hospitality, retail, healthcare, education, as well as conference and exhibition centers.
The project is spread over 4,000 acres, which would consist of 462 acres dedicated to real estate
development.
Hardware Park: Admeasuring approximately 850 acres, it is expected to be developed as an
exclusive park for hardware companies, with specific areas allotted for Taiwanese companies. In total,
three companies are operational with the allotment of 47 corporates. (Prominent allottees include Shell
Technologies, Degremont, IFCI Financial City, etc.).
Aerospace Park: Admeasuring approximately 980 acres, it includes an Aerospace SEZ and is
expected to be developed as an aerospace hub. The park has witnessed 52 allotments so far, wherein
17-18 companies have taken possession. Of these, five companies have commenced activity inside the
park. (Prominent allottees include Starrag Heckert, Wipro Actuators, Amada, etc.).
IT/ BT Parks: Admeasuring approximately 1,160 acres, these have witnessed negligible activity with
142 allottees so far. (Prominent allottees include Infosys, TATA Consulting Engineers, Reliance Info
Comm, etc.).
Devanahalli Business Park: This project will provide another 309 acres of infrastructure
for hospitals, retail and hospitality development adjacent to northern boundary of the Bangalore
International Airport Limited (BIAL). It will be a multi-use business park with two IT parks of 50 acres
each, a central business district on 35 acres, three hospitals on 26 acres, retail and hospitality on 22
acres, a finance district on 25 acres, and a goods assembly unit on 25 acres.
Focus and impact on growth corridors: Development of all such parks and innovation centers is
expected to boost basic infrastructure, generate employment and improve commercial/residential real
estate activity in and around these growth hubs in the North, East and South of the city. Moreover, the
main aim of government and semi- government agencies is to acquire land and form industrial areas in
the state, provide basic infrastructure in each industrial area, expand and promote development of single
unit complexes. Many of these proposed parks are currently in various stages of development and are
expected to be fully operational in the next 1015 years.
CBRE Ltd. 2016

| 11

Bangalore The Star That Shines The Brightest| India

Bangalore
Office MarketKey Highlights

Expanding towards the Periphery

Largest Office Hub in India


Over the past two decades, Bangalore has emerged as the nerve center of Indias information
technology industry characterized by the presence of a large number of prominent IT/ITeS companies,
Research and Development (R&D) centers, and prominent educational institutions. Sustained demand for
IT/ITeS office space has spurred growth of commercial real estate in the city, with a significant expansion
in transaction velocity across most micro-markets in the past few years.
In recent times, Bangalore has not only outperformed its regional counterparts, Delhi and Mumbai, in
terms of quantum of space transacted but also in terms of expansion of organized investment-grade
office stock. Sustained demand for office space has consistently driven commercial real estate growth in
the city that crossed a milestone in mid-2013by becoming the first Indian office hub to join the global
club for 100-million-sq. ft. office markets. Furthermore, the year 2015 recorded the highest quantum
of new supply infusion at nearly 12.7 million sq. ft., mainly concentrated in the three micro-markets of
ORR, North Bangalore and Whitefield. The citys overall commercial office stock stands at approximately
127 million sq. ft.; compared to other prominent commercial hubs such as Delhi NCR (95 million sq. ft.)
and Mumbai (87 million sq. ft.).

Availability of high quality office space at affordable rentals, presence


of skilled manpower along with good connectivity and improved
infrastructure are some of the reasons that have spurred demand
for office space from corporate occupiers. While demand for office
space in the Central Business District (CBD) has been historically
high due to its locational and connectivity advantages, recent times
have witnessed a flight to quality by tenants to more cost effective
commercial hubs in the suburban/peripheral areas of the city. The
MarathahalliSarjapur Outer Ring Road (ORR), Whitefield, and
peripheral locations of North Bangalore, in recent times, have
emerged as the growth vectors for the citys commercial real
estate market, accounting for a dominant share of corporate
real estate supply and absorption dynamics. The Marathahalli
Sarjapur ORR and Whitefield, in particular, have emerged as
preferred options for corporate also compete with each other
on the basis of rents quoted. Whitefield commands one of
the lowest commercial rentals across the city at INR 3040
per sq. ft. per month owing to its significant distance from
the city center, and ample availability of supply keeping
rentals in check23. In comparison, the ORR has witnessed
strong transaction velocity in the past couple of years,
amid improved infrastructure and a growing occupier
preference for built-to-suit developments. Consequently,
the average rents in this micro-market are almost
double that of Whitefield.
CHART 2: BANGALORE EXISTING AND PIPELINE OFFICE SUPPLY

CHART 1: YEAR WISE COMPARATIVE OF STOCK IN TOP TIER-I CITIES

86

80

77
67

95

79

9.8

In mn sq ft

Grade A Stock (In Mn sq ft)

88

127

114

103

96

12.8
12.7

3.9

87

83

70
62

2015
Source: CBRE Research, Q4 2015.

2011
Source: CBRE Research, Q4 2015.

12 |

2012

2013

2014

2015
Delhi

Mumbai

Bangalore

2016

2017(E)

2018(E)
Existing

Pipline

Today, Bangalore leads other Indian office hubs in transaction activity and supply infusion,
accounting for a share of 33% of the entire development completion pipeline and
approximately 32% of total transaction activity in the leading cities during the first three
quarters of 2015. Moving ahead, Bangalore will continue to lead project completions with
a share of approximately 27% (~23 million sq. ft.) of the total supply pipeline lined up
in the leading cities till the end of 2017. Most of this pipeline will be concentrated in the
peripheral, decentralized hubs of the city, with the ORR constituting a share of approx.
31%, North Bangalore at 23% followed by PBD - Whitefield/Electronic City/others
at 21%.
Source:
23. In the 1990s and early 2000s, the Government allocated a large quantum of industrial land to developers for developing commercial office space. The land was allocated to developers (clear title land at
economical rates) with the condition to develop the area in a certain time period after land allocation. This led to constant and continuous addition of supply in Whitefield over the last 78 years, even when
demand was lower. Thus the Whitefield micro-market has noted continuous addition of supply with vacancy levels in the range of 4-7 million sq. ft., keeping rentals in check.

CBRE RESEARCH

CBRE Ltd. 2016

| 13

Bangalore The Star That Shines The Brightest| India

Rental arbitrage
remains a key point of
interest for corporate
occupiers
Despite being a leader in transaction quantum
and office development activity, Bangalore also
offers a significant rental arbitrage as compared
to other leading office hubslargely as a
consequence of relatively lower land values and
subdued capital appreciation of land / assets
across various micro-markets in the city. Over
the years, moreover, ample commercial supply
availability in the city has kept commercial rents
under check across most micro-markets.

Similarly in the peripheral micro-markets, the


rental values are far lower at INR 3040 per
sq. ft. per month in Whitefield, compared to
the peripheral locations of the other two cities,
with a rent of INR 4550 per sq. ft. per month
at Navi Mumbai/Thane and INR 8595 per sq.
ft. per month at Gurgaon (NCR). Even when a
relative comparison is drawn between the ORR
in Bangalore and DLF Cybercity in Gurgaon
(NCR)the two leading IT office hubs in the
country accounting for more than 5 million sq.
ft. of space take-up individually on an annual
basisone can clearly see a rental ratio of 1:2.
Rents in DLF Cybercity are in a range of INR
110120 per sq. ft. per month, while those in the
ORR are in a range of INR 6065 per sq. ft. per
month.

Consequently, average rental values in the city


CBD hover in the range of INR 105115 per sq.
ft. per month, less than half the rentals in the city
centers of Delhi (Connaught Place, INR 290300
per sq. ft. per month) and Mumbai (Nariman
Point, INR 210220 per sq. ft. per month).

This rental arbitrage is one of the key drivers of


occupier focus towards Bangalore; and despite
a sustained rental revision in most micro-markets
across the city in recent quarters; it is likely to
remain a strategic advantage for the citys office
market at least in the short to medium term.

Chart 3: City-wise comparison


Bangalore scores highest among top 7 tier-I cities in India
City

Grade A
Office Stock

Cost of
Living

IT/ ITeS
Presence

Talent
Pool

Social
Infrastructure

Physical
Infrastructure

Bangalore
Chennai
Hyderabad
Pune
Mumbai
Delhi NCR
Kolkata
Source: CBRE Research, Q4 2015.

As per an office occupier survey conducted by CBRE India in mid-2015, Bangalore scored the highest
among Indian cities, in terms of occupier's expansion strategies over the next two years:
CHART 4: OCCUPIERS PREFERENCE - EXPANSION STRATEGIES

Bangaluru
Mumbai
Gurgaon
Chennai
Hyderabad
Delhi
Pune
Noida
Kolkata
Ahmedabad
0%

5%

10%

15%

20%

25%

30%

% Share
Source: CBRE Research, Q4 2015.

Note: Location Preference of Corporates looking for expansion among Tier I cities in India, over the next two years

14 |

CBRE RESEARCH

CBRE Ltd. 2016

| 15

Bangalore The Star That Shines The Brightest| India

BANGALORES LEADING OFFICE NODES


NH-7-Hyderabad
Bellary Road
Doddaballapu
Road

Peripheral Ring Road (PRR)

Airport Elevated
Expressway

Tumkur Road

HEBBAL

NH4-Chennai

NH4-Pune

Operational Roads
Operational Metro Line

Under construction Metro Line


Under construction Road
Proposed Metro Line

OUTER RING ROAD


Magadi Road

NBD : North Bangalore


CBD : Central Business District
EBD : Extended Business District
SBD : South Bangalore District
ORR : Outer Ring Road
PDB: Peripheral Business District

NBD

Prominent Locations: Banaswadi, Hebbal,


Mekhri Circle, Yeshwantpur, Bellary Road etc.
Office Stock: Approx. 14.8 mn sq. ft. (Grade A)
Supply pipeline: Approx. 5 mn. sq. ft. till end
of 2017
Average Rentals: Approx. INR 50
60/sq.ft/month. Average rental growth of
approx.23% during 2010-2014
Top Sectors: Technology, Engineering
/Manufacturing, Telecommunications

16 |

CBRE RESEARCH

Peripheral Ring Road

NH-7-Hosur Road

Mysore Road

CBD

Sarjapur Road

NICE Ring Road

Prominent Locations: MG Road, Lavelle Road,


VM Road, Cunningham Road etc.
Office Stock: Approx. 8.85 mn. sq. ft. (Grade A)
Supply pipeline: Approx. 1 mn. sq. ft. till end
of 2017
Average Rentals: Approx. INR 90 110
/sq.ft/month. Average rental growth of approx. 28%
during 2010-2014
Top Sectors: Engineering/Manufacturing,
Technology, Media, Banking/Financial Services

ELECTRONICS CITY

EBD

SBD

ORR

PDB

Prominent Locations: Airport Road, CV Raman


Nagar, Inner Ring Road, Old Madras Road, Ulsoor,
Koramangala etc.
Office Stock: Approx. 18.9 mn. sq. ft. (Grade A)
Supply pipeline: Approx. 3.7 mn. sq. ft. till end
of 2017
Average Rentals: Approx. INR 80 100
/sq.ft/month. Average rental growth of approx. 27%
during 2010-2014.
Top Sectors: Technology, Banking/Financial
Services, Engineering/Manufacturing

Prominent Locations: Bannerghatta Road, Hosur


Road, JP Nagar, Mysore Road etc.
Office Stock: Approx 15.8 mn. sq. ft. (Grade A)
Supply pipeline: Approx. 1.2 mn. sq. ft. till end of
2017
Average Rentals: Approx. INR 45
55/sq.ft/month. Average rental growth of
approx.22% during 2010-2014
Top Sectors: Technology, E-commerce

Prominent Locations: Marathahalli ORR,


Sarjapur ORR
Office Stock: Approx. 35.2 mn. sq. ft. (Grade A)
Supply pipeline: Approx. 7.5 mn. sq. ft. till end
of 2017, including IT-Non SEZ and SEZ
Average Rentals: Approx. INR 60
68/sq.ft/month. Average rental growth of
approx.31% during 2010-2014
Top Sectors: Technology, E-commerce,
Banking/Financial Services,
Engineering/Manufacturing,
Pharmaceuticals/Healthcare/Biotechnology

Prominent Locations: Whitefield, Electronic City,


Sarjapur Road etc.
Office Stock: Approx. 33.8 mn. sq. ft. (Grade A)
Supply pipeline: Approx. 5 mn. sq. ft. till end
of 2017
Average Rentals: Approx. INR 33
37/sq.ft/month. Average rental growth of
approx.31% during 2010-2014
Top Sectors: Technology,
Engineering/Manufacturing, Banking/Financial
Services

CBRE Ltd. 2016

| 17

Bangalore The Star That Shines The Brightest| India

Central Business District (CBD)

Extended Business District (EBD)

CHART 5: SUPPLY, ABSORPTION & VACANCY%:

CHART 7: SUPPLY, ABSORPTION & VACANCY%:

10%
8%

0.4

6%
4%

0.2

6%
5%

In mn sq. ft.

In mn sq. ft.

0.6

4%
3%

2%

0%

2%
0

1%

0%
2011

2012

2013

2014
Supply

Source: CBRE Research, Q4 2015.

2011

2015
Absorption

Vacancy %

2012

2013

2014

2015
Supply

Source: CBRE Research, Q4 2015.

85

108
95

75

95

INR/sq ft/month

85

2012

2013

70

70

70

2012

2013

2014

INR/sq ft/month

90

2014

2015

2011

2015

Source: CBRE Research, Q4 2015.

Source: CBRE Research, Q4 2015.

Market Dynamics

Market Dynamics

What Works? Centralized location; excellent connectivity; superior image and profile; proximity to
retail and residential hubs; well-developed physical and social infrastructure.

What Works? Proximity to the city center; quality infrastructure; relatively higher availability of Grade
A space with larger floor plates; proximity to residential catchments and social infrastructure; presence of
select large-sized tech parks and small to medium sized commercial developments.

What Doesnt? Limited availability of Grade A space, restricting scope for expansion or large-sized
leasing; lack of developable land parcels; relatively higher asset pricing expectations by developers for
select developments.

What Doesnt? Relatively higher asset pricing vis--vis peripheral locations; limited options for
further expansions.

Where is the Focus? Small sized transactions in second generation spaces or select Grade A
developments; a sizable part of the overall vacancy is attributable to older Grade B developments.

Where is the Focus? Small to medium sized transactions in mostly second generation spaces vacated
previously by prominent technology firms relocating to the Outer Ring Road (ORR).

Recent Trends: Mostly small-sized space take-up by technology and banking firms; select occupiers
looking at second generation spaces vacated by prominent technology firms relocating to peripheral
locations, as well as vacant Grade B spaces; rental appreciation in relatively newer office developments,
despite tapered growth in recent quarters; instances of ground and mezzanine floors being leased out
for retail outlets.

Recent Trends: As vacancy levels deplete in the ORR, select occupiers have returned to this micromarket, aiding transaction activity. Rental values across prominent developments are on an upward
trajectory, appreciating by 6-7% q-o-q and by nearly 21-22% y-o-y in Q3 2015. An infusion of
approximately 1.6 million sq. ft. of IT space by the end of 2016 is likely to generate significant occupier
interest and trigger transaction activity. On the back of strong occupier demand, rental values are likely
to appreciate further in the short to medium term.

Top Sectors: Engineering/Manufacturing, Technology, Media, Banking/Financial Services

18 |

Vacancy %

CHART 8: RENTAL TREND

CHART 6: RENTAL TREND

2011

Absorption

CBRE RESEARCH

Top Sectors: Technology, Banking/Financial Services, Engineering/Manufacturing

CBRE Ltd. 2016

| 19

Bangalore The Star That Shines The Brightest| India

South Bangalore (SBD)

Outer Ring Road (ORR)

CHART 9: SUPPLY, ABSORPTION & VACANCY%:

CHART 11: SUPPLY, ABSORPTION & VACANCY%:

0.8
0.6

8%

20%

6%

15%

10%

2%

5%

0%

4%

0.4
0.2
0
2011

2012

2013

2014

2015
Supply

Source: CBRE Research, Q4 2015.

In mn sq. ft.

In mn sq. ft.

1.0

0%
2011

Absorption

Vacancy %

2012

2013

2014

2015
Supply

Source: CBRE Research, Q4 2015.

46
45

64

45

55
INR/sq ft/month

45
INR/sq ft/month

Vacancy %

CHART 12: RENTAL TREND

CHART 10: RENTAL TREND

44

2011

Absorption

2012

2013

2014

2015

48

48

2011

2012

50

2013

2014

2015

Source: CBRE Research, Q4 2015.

Source: CBRE Research, Q4 2015.

Market Dynamics

Market Dynamics

What Works? Proximity to prominent residential catchments in the South, ample social infrastructure;
typically commands lower office rents in comparison to the more established and centrally located
micro-markets in the city.

What Works? vailability of quality office space with large-sized floor plates; proximity to the CBD and
major residential catchments; access to a large talent pool; availability of contiguous developable land
parcels providing scalability options to corporates; improved connectivity to the airport; infrastructure upgradation to turn the ORR into signal-free corridor; large-scale completed SEZ supply integrated park
type environment with amenities such as food courts, crches, hotels, etc; relatively competitive asset
pricing vis--vis central and secondary locations of the city.

What Doesnt? Limited space options for occupiers and absence of quality supply addition in
near future; narrow roads leading to high traffic congestion; construction of MRTS adding to traffic
congestion.
Recent Trends: Transaction activity remained dormant in recent times; select leasing from technology
firms for small to medium sized back-office requirements; while select occupiers are evaluating
relocation to peripheral areas due to rental differential and congestion caused by ongoing metro
construction. Rental growth remained muted in recent times, weakest among all micro-markets.
Top Sectors: Technology, E-commerce

What Doesnt? Limited space available in completed developments in the last 1-1.5 years, especially
for sizes higher than 100,000 sq. ft.; as developers increasingly focus on build-to-suit (BTS) projects, an
artificial rental growth remains maintained (due to limited addition of speculative spaces), which might
disrupt the rental arbitrage offered by this micro-market vis--vis other prime locations such as the CBD
and EBD; increasing traffic woes on account of large employee population in all these parks.
Where is the Focus? Medium to large sized transactions for consolidation-cum-expansion initiatives
in tech parks, SEZ developments; active pre-commitment of under-construction space, especially new
phases of existing well leased office projects; BTS remains a preferred option as well.
Recent Trends: ORR continues to dominate commercial office leasing in the city, accounting for a
major share (more than 50%) of the leasing activity in the past four quarters. It offers scope for further
expansion/ consolidation and a number of corporate firms have chosen BTS space options apart from
upcoming under construction projects.
Top Sectors: Technology, E-commerce, Banking/Financial Services, Engineering/Manufacturing,
Pharmaceuticals/Healthcare/Biotechnology

20 |

CBRE RESEARCH

CBRE Ltd. 2016

| 21

Bangalore The Star That Shines The Brightest| India

North Bangalore (NBD)

CHART 13: SUPPLY, ABSORPTION & VACANCY%

CHART 15: SUPPLY, ABSORPTION & VACANCY%

50%

40%

30%

20%

In mn sq. ft.

In mn sq. ft.

Peripheral Business District (PBD)

2012

2013

2014

10%
5%
0%
2011

2015
Supply

Source: CBRE Research, Q4 2015.

15%
2

0%
2011

20%

10%

25%

Absorption

Vacancy %

CHART 14: RENTAL TREND

2012

2013

2014

2015
Supply

Source: CBRE Research, Q4 2015.

58

30

30

2011

2012

2013

53
48

INR/sq ft/month

30

55

54

32
INR/sq ft/month

Vacancy %

CHART 16: RENTAL TREND


36

2014

2015

2011

2012

2013

2014

2015

Source: CBRE Research, Q4 2015.

Source: CBRE Research, Q4 2015.

Market Dynamics

Market Dynamics

What Works? Relatively lower rentals, quality developments with larger formats as well as the
presence of newer residential catchments and developing social infrastructure. Rental values in the
peripheral business districts of Whitefield and Electronic City are typically lower than other Bangalore
micro-markets and other leading cities such as Delhi and Mumbai. The two micro-markets are attractive
for firms seeking large spaces at comparatively lower rentals, since they offer tenants significant scope
for expansion due to availability of sufficient scalability options.

What Works? A new location offering a sizable supply pipeline (although mostly planned) along with
advantages such as proximity to the international airport, good connectivity with the city center and a
superior infrastructure base. On account of presence of Airport in the Northern periphery, government
has undertaken various infradtructure initiatives to improve connectivity of the location by developing
wide roads, signal free corridors, etc. Currently, numerous mid-sized commercial offices projects are
under construction/under planning stage in Hebbal and Yelahanka. SEZ developments on Hennur Road
and Bellary Road are likely to propel the growth of this suburb as a key office market.

What Doesnt? Distance from the city center, poor connectivity and significant (physical) infrastructure
issues have pushed demand towards the ORR and North Bangalore; on-going metro work and other
infrastructure projects might add to the already existing traffic congestion. Electronic City specifically
suffers from lack of quality residential catchment, social infrastructure as well as distance from the
international airport; factors that have deterred office occupiers from entering this region in recent times,
leading to rental stagnation.

What Doesnt? As the micro-market is a newer growth vector, majority of the existing employee
catchments are located in South / East/ South-east Bangalore, thus there is significant resistance from
employees to travel to NBD for work. This has led to corporates deferring their decision to move to
North Bangalore. The Area also Lacks completed residential supply; social infrastructure in terms of
retail, recreational options, limited healthcare options and intermittent power supply and limited water
availability;

Where is the Focus? Medium and larger-sized spaces, primarily driven by consolidation and
expansion requirements of prominent technology firms; pre-commitment in few under-construction
developments.

Where is the Focus? Medium to large format spaces in recently completed or under-construction
projects nearing completion.

Recent Trends: Has been witnessing steady demand, however, continuous supply infusion over the
past few quarters has resulted in higher vacancy levels, currently estimated at approximately 30%. The
region witnessed strong occupier demand during the year.

Recent Trends: Office space take-up rose significantly during the third quarter, largely led by the IT
sector. This area also saw pre-commitments in select under-construction properties nearing completion.
Areas such as Bellary Road, Hebbal and Nagavara, noted most project completions during the review
period. Offers significant potential for demand generation due to the sizable supply lined up in
2-3 years.

Top Sectors: Technology, Engineering/Manufacturing, Banking/Financial Services

22 |

Absorption

CBRE RESEARCH

Top Sectors: Technology, Engineering/Manufacturing, Telecommunications

CBRE Ltd. 2016

| 23

Bangalore The Star That Shines The Brightest| India

Comparing
Corporate Hubs
The matrix below compares the prominent office micro-markets in the city along real estate indicators
such as availability of quality space, pipeline strength, pricing, infrastructure strength and connectivity,
among others.
It is clear from the analysis below that the central locations of the city, namely the CBD, EBD and South
Bangalore, outclass the citys peripheral locations in terms of infrastructure availability. However, despite
this perceptible advantage, the Outer Ring Road stretch has clearly emerged as a preferred destination
for prominent corporate occupiers to enter and expand their footprint in the city, largely accentuated by
the availability of high quality office space, upcoming infrastructure, better connectivity and the sizable
supply pipeline for the next 23 years. The ORR is followed by the peripheral districts of Whitefield /
Electronic City and North Bangalore in terms of their ability to offer large sized spaces for facilitating
expansion / consolidation activities of corporate firms. Currently the ORR also offers the highest
concentration of SEZ stock across all micro-markets in the city.
Parameter

CBD

EBD

South
Bangalore

ORR

PBD

North
Bangalore

Availability of quality space for large scale expansion


(presence of ample scalability options for occupiers)
Occupier focus (transaction quantum)
Competitiveness in terms of Total Occupancy Cost
(average rentals, service charges & tax)
Strength of supply pipeline
Availability of SEZ options
Strength of the catchment
Competitiveness in terms of residential
capital values
Proximity to the International Airport
Planned infrastructure investments/potential economic
drivers*(road & bus connectivity, access to current and
future public transportation modes MRTS, upcoming
infrastructure, power and water availability)
Long-term land availability as a propeller of
development activity
Social infrastructure network *(presence of
educational institutions, healthcare facilities, hotels,
leisure and entertainment facilities)
Note: All 5 blocks filled up indicate the highest rating, while one block filled up indicates the lowest rating (rating out of five). All Empty blocks represent non-applicability of the parameter.

However, while measuring potential for future growth, North Bangalore leads other micro-markets,
owing to its proximity to the International Airport, better transportation network and a number of
infrastructure initiatives undertaken by the Government (such as the Information Technology Investment
Region, International Finance Centre, Hardware Park and Aerospace Park). Large scale availability
of developable land parcels offers the micro-market a significant potential for stimulating future
development activity.

24 |

CBRE RESEARCH

Emerging Trends
in Bangalores
Office Leasing
Markets
Increased focus on BTS developments
To reduce speculative risks associated with developing multi-tenanted buildings, developers are
increasingly focusing on developing Built-to-Suit (BTS) spaces with pre-determined specifications. From
an occupier perspective, BTS is an attractive proposition. Most corporate firms in Bangalore are seen
committing to large scale floor plate spaces. Consequently, they prefer campus style alternatives where
the design is customized as per their unique space needsprojecting the firms image, maximizing
location choices, improving space efficiency and incorporating latest construction materials and
technology. Moreover, any speculative office space supply entering the market remains limited, providing
greater control over rental values. This is particularly true in the case of Bangalores ORR, where low
vacancy levels and limited multi-tenanted building supply, together with most of the pipeline being BTS,
has already seen pre-commitments from various occupiers. This exercise is also prevalent in some of
the large tech parks in North Bangalore. Of the entire office stock in Bangalore, approximately 30%
comprises BTS developments.

Shift from pure consolidation to expansion


strategies
As organizations respond to the forces of globalization, amid a backdrop of economic uncertainty
and cost optimization, their real estate portfolio strategies and responses to the need of expanding
headcounts and footprint keep varying. Optimum space utilization, efficiency and productivity are some
of the key parameters on the basis of which companies redefine their real estate strategies. In recent
years, to drive down operating costs and improve efficiency, a number of corporates in Bangalore have
been aiming at operating through a single facility rather than multiple locations within a city. There are
significant cost advantages in such a strategy, especially improvement in the operational efficiency of the
business. Many corporates who find the real estate costs of their current locations unsustainable over
the long run have been opting to move to new locations that offer similar advantages and facilities at
comparatively lower prices. Select corporate firms have also responded to the pressures of increasing
headcount by simply leasing new office space in secondary and peripheral locations of leading tier I
cities as well as in smaller cities. In recent times, however, there has been a gradual shift in occupier
strategy from pure consolidation of their footprint to a mix of consolidation and expansion, and pure
expansion initiatives. Prominent occupiers from financial services, IT/ITeS, and consulting / research
sectors, among others, have expanded their footprint in mostly suburban / peripheral micro-markets
such as ORR / Whitefield. In a recent research undertaken by CBRE targeting shared services occupiers,
it was noted that out of all the expansion-led transactions closed over the past two years, approximately
half were closed within Bangalore. Moreover, this translated to almost 90% of the entire space takeup by shared services occupiers in the city during the review period. This clearly signifies that occupier
focus has gradually shifted from consolidating to a larger facility to committing to future expansion plans
across various micro-markets within the city.

CBRE Ltd. 2016

| 25

Bangalore The Star That Shines The Brightest| India

Growing preference for purchasing against


leasing

Move towards newer geographies North


Bangalore

As the commercial office market continues to strengthen, corporate firms (particularly those from
technology sectors, including start-ups) have started to view Bangalore as a long-term office space
destination. Hedging against a sustained appreciation in asset pricing, an increasing number of firms
have been opting to purchase office space as against leasing space. Apart from creating a possible
buffer against rising capital values, companies have also discovered that the practice of purchasing
office space is not only more cost effective in the long run, but also beneficial in building a significant
asset pool. Bangalore, which offers high-quality office space at comparatively lower capital values
(refer to the City Snapshot section of this report), also offers a significant scope for expansion and
consolidation. Consequently, corporate firms such as Adobe, Scandisk, Honeywell and IMS Healthcare,
among others, have purchased space in the prominent office developments of Prestige Tech Park,
Embassy Tech Square, Prestige Tech Platina, and RMZ Ecoworld. Furthermore, since most of these
purchase transactions are for the end-users customized space needs (in either under-construction
or planned projects), yields are relatively lower and hover in a range of 89.5%. For investment
transactions involving institutional investors, however, office yields are in a range of 1010.5%.

Bangalore's commercial realty market originated from the central locations of the city, and expanded
into the secondary and peripheral locations in South, South-East and East Bangalore. However, with
the establishment of a prominent tech park, ample availability of developable land, low capital value
of property and proximity to the international airport, Bangalore North has become the focus of
prominent corporates looking for expansion in the city in the medium to long term. The initiation of
a few infrastructure projectssuch as the elevated expressway, the proposed high-speed rail link, the
Metro line, and the planned Peripheral Ring Road (PRR), access to Devanahalli and the international
airportare likely to improve connectivity and further enhance the demand for commercial space in
North Bangalore. In addition, government initiatives such as the Information Technology Investment
Region (ITIR), the International Finance Centre, the Hardware Park and Aerospace Park are likely to add
to the infrastructure rejuvenation of this micro-market in forthcoming years. Furthermore, the operational
Hebbal FlyoverAirport stretch has already contributed greatly to the growth of office demand in the
region.

Emergence of new sectors


Even as technology firms remain the prima facie driver of corporate space transactions in the city,
new sectors have also emerged to propel the citys office market towards a higher growth trajectory.
Corporate firms, especially from emerging sectors such as e-Commerce, mobile-application-based
service providers, consulting, research and analytics, et al., have increasingly displayed their preference
for expanding or setting up operations in the citys office markets.
The e-Commerce sector, in particular, has seen its footprint expand across the city in the past two years
or so. Space take up by e-Commerce firms rose from 2% in 2014 to 15% in 2015, with prominent
e-retailers such as Amazon, Flipkart, Snapdeal, Myntra, Redbus, and Urban Ladder, among others,
occupying (or pre-committing) mid-sized to large-sized office spaces in the prominent office hubs of
ORR and other peripheral markets. Mobile application-based service providers such as Ola Cabs, Uber
and Taxi for Sure, among others, have also been active in recent times. These companies have grown
in scale and operations; and their contribution to the citys overall leasing volume is expected to grow
substantially in the years to come.

Additionally, as supply saturates in the ORR and other prime locations of the city, and as the rental
arbitrage enjoyed by Bangalores prime office hubs reduces, occupiers will increasingly turn their focus
to the relatively cost-effective North (further North beyond ORR). The year 2015 already appears to be
a threshold in this micro-markets evolution as a growth centers for the citys commercial market. North
Bangalore's overall share in the city's development completions has grown from merely 13% during
2011-14, to more than 30% in 2015. Moreover, a sizable supply pipeline of approximately 55.5
million sq. ft. of SEZ/Non-SEZ space is likely to be infused into the micro-market in the next two years.
North Bangalore has also witnessed frenetic residential activity in recent times with a steady stream of
new projects being launched by most prominent developers (Brigade, RMZ, Godrej, Embassy, Prestige,
Purvankara, Sobha, Bhartiya, Karle, et al.), which has been complemented by a healthy off-take from
investors as well as end-users. Availability of land parcels along the Thanisandra, Hennur Road and
Horamavu belts are likely to facilitate commencement of new projects and help maintain healthy supply
dynamics in the micro-market, while expansion in the IT sector will keep feeding the supply in the short to
medium term. Keeping in mind the steady pace of commercial and residential growth, North Bangalore
appears to offer the trajectory towards which Bangalores urban growth is expected to expand. It is
expected that by 201719, the completion of most infrastructure projects, tech parks and growth in
social infrastructure are likely to significantly shift Bangalores office activity towards this micro-market.

Workplace customization to optimize efficiency


To improve operational efficiency and cut costs, companies are increasingly looking to optimize their
space portfolio. Corporate firms are revamping their existing space portfolio and transitioning towards
a more streamlined seating arrangement. At the same time, city-based developers are offering space
options that are customized to client requirements. This enables companies to improve their operational
efficiency, cut costs and focus on their core areas. For instance, a number of prominent city-based
developers such as RMZ, Prestige, Embassy, and Bagmane have set up large-sized standalone food
courts/cafeterias within their sprawling office parks, enabling companies to cut down on costs of setting
up their own cafeteria. As a growing trend, firms have been showing interest in paying additional rent for
particular projects with added amenities, enabling improvement in cost efficiency.

26 |

CBRE RESEARCH

CBRE Ltd. 2016

| 27

Bangalore The Star That Shines The Brightest| India

Recommendations for Occupiers


and Developers
Occupiers looking for large spaces
(for consolidation and other
requirements) should consider key
factors such as Metro connectivity,
availability of power, neighboring
residential catchments, SEZ vs
Non SEZ routes in defining their
real estate strategies; North
Bangalore, Whitefield and Sarjapur/
Marathahalli ORR would still remain
key micro-markets.

Owing to the paucity of


supply across CBD, EBD
and ORR micro-markets,
occupiers looking at short
term leases could also access
bridge space/swing space
opportunities to hedge the
rising commercial rents.

occupiers

A fine balance between real estate


costs and efficient workplace
strategies will have to be drawn.
Occupiers need to assess their
occupancy ratio/utilization patterns
to see that their spaces are optimally
utilized. At the same time costs
need to be justified- all this without
impacting employee efficiency and
productivity.

Start-ups and small/mid-sized


occupiers should continue to
consider second generation
space options across EBD and
few off EBD markets keeping
in mind better connectivity,
availability of talent pool,
and saving on operational
expenditure.

28 |

CBRE RESEARCH

dEVELOPERS

Securing long term partnerships


with occupiers by providing
incubation spaces for their short
term needs, staggered growth
opportunities through options,
would bring in flexibility into
occupier real estate strategy, thus
ensuring long term loyalty.

In order to retain occupier


interest developers should
retain lease hold properties
and not look at strata sale
opportunities.
Developers should be
realistic of demand
patterns and plan their
construction by factoring
in both - demand peaks
and lows to avoid
vacancy risks.

Developers planning large


tech parks should consider
providing both SEZ and Non
SEZ solutions for occupiers
looking for expansion/
consolidation.

CBRE Ltd. 2016

| 29

Bangalore The Star That Shines The Brightest| India

Outlook
Buoyed by improved economic sentiments, steady
occupier interest, an improving infrastructure
base, and its intrinsic strengths as a pioneering
hub for technology, research, development and
shared services platformsBangalore is likely to
maintain its leadership position in the countrys
corporate real estate market in the medium to
long term. It will continue to offer technology
firms and allied sectors a stable business
environment and access to a large, skilled labor
pool. Consequently, while technology sectors and
back-office operations will continue to remain
its principle demand drivers for commercial
office space, increasingly, new sectors such as
manufacturing, e-commerce, online start-up
ventures and biotechnology will also eventually
contribute to building the citys commercial
realty skyline. The role of policy schemessuch
as Digital India, Skill Indiaand the booming
e-Commerce sector may not be stressed enough
in this context. These will also play a positive role
in supporting the long-term expansion of the
citys commercial office sector.
Presently occupiers remain focused on Whitefield
and the ORR stretch between Marathalli and
Sarjapur Road; going forward, an incremental
shift towards newer locations such as North
Bangalore is expected. This is mainly owing to
factors such as attractive lease rentals, improving
social / physical infrastructure and residential
developments in the vicinity of the office clusters.
Henceforth, owing to inordinate delay in
infrastructural developments across the growth
corridors, most developments along the ORR
and PBD would continue to witness corrections
in the projected pipeline supply. This is expected
to keep office occupier demand under pressure
in the short and medium term. However, a
point of caution would be the sizeable office
development pipeline spread across most micromarkets, particularly North Bangalore, and the

30 |

CBRE RESEARCH

associated vacancy risks. Occupiers would be


closely following the timely implementation of
infrastructure works and the completion of office
projects in such micro-markets to expand beyond
the ORR and central locations. For now, the
city must receive a strong infrastructure backing
from the local government to expand its present
development footprint and sustain the growth of
its commercial office sector in the long run.
With very limited space availability in core
locations, transaction activity will continue to
move towards the peripheral micro-markets of
ORR, Whitefield, and more importantly, North
Bangalore. Corporate space occupiers are
expected to be attracted by the prospects of
larger floor plates, cost effective rentals and
upcoming infrastructure in these locations.
Reduced vacancy levels in established micromarkets are likely to lead to healthy precommitments in under-construction projects
nearing completion. Increasingly, occupier focus
will also shift from pure consolidation to a mix of
consolidation and expansion, and pure expansion
initiativesparticularly from sectors such as
technology, engineering and manufacturing,
and banking/financial services. Large corporate
occupiers are also likely to continue to purchase
office spaces or buildings for self-use. This will be
particularly true of those from the IT/ITeS sectors
as they continue to hold a stronger view of the
market in their long-term business plans, apart
from avoiding risks of capital appreciation in
the long run. These demand drivers, for leased
as well as purchased space, are expected to
contribute to a sustained rental appreciation in
the short to medium term, resulting in Bangalore
maintaining its position as a rental leader among
office markets in India as well as the Asia Pacific
region.

For more information about this regional major report, please contact:
Research
Abhinav Joshi
Head of Research, India
+91 124 4659700
abhinav.joshi@cbre.co.in

BUSINESS LINE
Raghav Khilery
Assistant Manager India Research
+ 91 80 40740000
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