Bengaluru

Opportunities in Challenges
November 2017
Preface
“While the challenges are great, so are the opportunities.”
Bill Ford

Popularly known as the City of Millennials and driven by the significant growth of real estate
due to the technology services-driven economy.
Although the rapid urbanisation in the city outpaced its infrastructure growth, both the
aforementioned factors catered to the development of existing residential and retail precincts
and the emergence of new residential and retail precincts along the major roads of Bengaluru.
Here’ s a report that dives deep into the Office, Retail and Residential Real Estate scenario of
this dynamic city.
Innovation and disruption being the game changer in the office market of Bangalore,
technological advancements, automation and infrastructure challenges of rapid urbanization
together are transforming the conventional business strategies of the office market.
On the retail front, tech savvy Bengaluru is heavily adopting technology for superior shopping
experience be in on the high streets, mall or ecommerce causing a transformation in the
overall shopping pattern of the citizens of the city. The paper identifies and sheds light on a few
upcoming trends in the Retail Real estate in this market.
While the Residential Market struggles amid the prevailing uncertainties of Real Estate Act and
Goods & Service Tax, the developers are putting in all it takes to comply
with these changes while the buyers are adopting a wait and watch mode.
Newer formats of affordable housing, co-living and student housing are
gaining popularity and are on a rise.
Read on to discover the various opportunities in challenges that lie in the
beautiful city of Bengaluru.
Ramesh Nair
CEO & Country Head
JLL, India

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Young Bengaluru
City of Millennials Population

11.6 50.2%
Students, technology professionals, consultants, young entrepreneurs, start-ups, pubs, breweries, fine dining restaurants,
co-working, co-living and student housing all make Bengaluru a city of and for the millennial generation. About 50% of the
population of Bengaluru is aged between 25 and 60 years old and about 40% are under 25 years old.
Bengaluru is an innovation-oriented city and it has always welcomed change. Now, as the world is witnessing the fourth
industrial revolution - the digital revolution, Bengaluru is also participating in this revolution. Companies in Bengaluru are Millions1 Population
working towards developing advanced technologies to stay ahead of the curve of this revolution and the new generation
is contributing significantly to these disruptive innovations. Therefore, Bengaluru is always buzzing with tech-savvy between 25-60 1. Projected population for Bangalore urban as
youngsters who have migrated from different parts of the world to work here in world-class firms or start-ups, making it a
culturally a cosmopolitan city. The city not only offers the new generation with many opportunities in terms of work but
years2 per report by Directorate of Economics and
Statistics, Bangalore-2013
2. http://www.icmr.nic.in
also in terms of entertainment. 3. Jones Lang LaSalle City Momentum Index -2017
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World’s Premium Technology Hub
Bengaluru tops the JLL City Momentum Index (CMI) for the first time in 2017, driven by the significant growth of
real estate due to the technology services-driven economy. In addition to this, the socio-economic momentum
that relates to changes in city GDP, population, air passengers, corporate headquarters and FDI also contributed
significantly to move Bengaluru to the top of the index. 2015 2016 2017
Bengaluru is already an established IT hub of India as it has the presence of the world’s leading IT companies.
In addition to this, it is also one of the leading start-up hubs of India with a total funding of more than USD 6,000
million between 2014 and 2016. Although the rapid urbanisation in the city outpaced its infrastructure growth,
both the aforementioned factors catered to the development of existing residential and retail precincts and the
1 London London Bengaluru
emergence of new residential and retail precincts along the major roads of Bengaluru.
2 Nanjing Silicon Valley Ho Chi Minh City

3 Tianjin Dublin Silicon Valley

4 San Jose Bengaluru Shanghai

5 Beijing Boston Hyderabad

6 Shenzhen Shanghai London

7 Shanghai New York Austin

8 Ho Chi Minh City Sydney Hanoi

9 Boston Beijing Boston

10 Wuhan San Francisco Nairobi

11 San Francisco Nairobi Dubai

12 Chongqing Shenzhen Melbourne

13 Sydney Seattle Pune

14 Bengaluru Tokyo New York

15 Dubai Nanjing Dubai

4 1
14 World’s premier
Driven by Bengaluru’s strong technology hub
entrepreneurial growth with driving strong
presence of international real estate
IT giants along with largest demand
number of high-tech start-ups

Bengaluru - Opportunities in Challenges Bengaluru - Opportunities in Challenges

 Changing Landscape
of Office Real Estate
Flexibility and Innovation
Flexibility in Leasing Office Space
Bangalore’s office market is on the cusp of change. Technological advancements, automation and the
infrastructure challenges of rapid urbanisation together are transforming the conventional business strategies of
the office market and bringing innovation and disruption. Moving ahead from the conventional market dynamics
of a landlord or occupier market, the office market is today witnessing a large number of partnerships between
developers, landlords and occupiers to overcome the challenges of the changes that the industry is going through.
Occupiers are expecting more flexibility in terms of leasing spaces based on their near-term business requirements
that can be expansion, consolidation or improving the efficiency of existing spaces. Developers in Bengaluru have
been known to be very responsive to changes and emerging trends. As such, they are partnering with occupiers to
support leasing requirements according to their business needs.
Challenges Drive Innovation
In addition to the flexibility needed in space requirements, many companies are focusing on improved working
conditions and employee satisfaction. Companies are therefore working along with developers to meet these
goals. Traffic congestion along the key IT corridors is a major challenge in Bengaluru and significantly affects the
productivity of employees. The city is working on innovative solutions to face the traffic challenges along these IT
corridors. While the initiatives of the city development and management authorities are mostly mid- to long-term,
the developers and occupiers are chalking out plans to improve employee productivity and experience in the
meantime. Developers who own and operate the IT parks in Bengaluru are providing various entry and exit points
within the IT parks to ease traffic movement during peak hours. They also provide various amenities, such as
healthcare, crèche, gymnasium, fine dining and entertainment options, within the IT parks so that employees can
invite family and friends and spend time within the IT parks during peak traffic hours more productively.

Fast Facts - Grade A Office

Average
Stock Vacancy Rental Growth

103.5 2.9% 5%
Millions sq ft Y-o-Y

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Alternate Spaces and Emerging Locations
Future of Workspaces Emerging Locations
Bengaluru is one of the key office markets of India given its technology-based economy. Bengaluru’s key IT corridors are slowly becoming saturated. Most IT parks in the key sub-markets of the city have low vacancy levels in
The city has more than 100 million sq ft of office stock with a vacancy rate of less than 5%. Coworking their existing stock and the upcoming stock has high pre-commitment, given the good demand Bengaluru witnesses. Rents in these
Stock

1.6%
Bengaluru is well equipped with world-class IT parks to accommodate the business needs sub-markets have also risen sharply by 5-10 % y-o-y over the last two years, given the limited availability of leasable office stock. As
of large corporates. such, occupiers have limited options to expand or lease space in these sub-markets.
Bengaluru also has a fast growing start-up driven economy. Start-ups that comprise many The above parameters have led to the emergence of new office hubs in the city. Two locations that are growing at a fast pace are north
small and medium-sized enterprises are transforming the urbanscape of workspace in the Bengaluru along Bellary Road from Hebbal to Kempegowda International Airport and south Bengaluru along Sarjapur Road and
city. They have led to the emergence of what is called the “Future of Workspaces” – co-
working spaces and alternative workspaces.
Millions sq ft Hosur Road. About 10 million sq ft of space is coming up in north Bengaluru and about 2 million sq ft of space is coming up in south
Bengaluru in the next two years.

Flexible lease options, location benefits and the benefits of a collaborative work environment are
driving the demand for co-working spaces in Bengaluru. Many global and local co-working firms are offering spaces in Bengaluru. The
city currently has about 1.6 million sq ft of operational co-working space. In addition to co-working spaces, a few cafés in Bengaluru offer
seats to work with Wi-Fi connectivity on a daily or hourly rental basis.
Bengaluru Zone Map

Demand Drivers
• Flexible lease options
BYATARAYANAPURA
• Location benefits
• Collaboration and Networking

DASARAHALLI
WEST

EAST MAHADEVAPURA

SOUTH

RR NAGARA

BOMMANAHALLI

LEGENDS

STATE BOUNDARY

ZONE BOUNDARY

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What is the New
Shopping Trend?
Superior Shopping Experience
Tech savvy Bengaluru is heavily adopting technology for superior shopping experience be in on the high streets, mall or ecommerce.
It has transformed the overall shopping patterns of the citizens of Bengaluru. Bengaluru’s retail real estate is also witnessing a sea
change due to changing demographics and lifestyle. A few upcoming trends in Bengaluru’s retail real estate market are as follows:

Happening High Streets

Bangalore is a veritable democracy of retail. Every value-cluster finds a presence and the clusters are widening and deepening.

• Shifting Epicentre
Bengaluru’s shopping epicentre is fast moving from the traditional city centre high streets of Brigade Road, Commercial Street and
MG Road to the new high streets of Indira Nagar, Koramangala and Jayanagar that are established residential locations.
• Distinct Character
High streets in Bengaluru have their own distinct characteristics and cater to a specific target segment. For instance, Lavelle Road
attracts high-net-worth individuals and the rich, offering niche and exclusive products, while Marathahalli has developed as a
location for discount or factory outlets. The high street locations of Jayanagar and Malleshwaram continue to interest retailers in
the women’s apparel, gems and jewellery segments.
• Retaining the Pub Capital Status
The food and beverages (F&B) industry is mainly driven by youth. Bengaluru is witnessing the rapid growth of quick serving
restaurants and pubs. With the largest number of pubs in the country, Bengaluru is termed the “pub capital of India”.

Bengaluru retained the status of pub capital by de-notifying the order of the
Supreme Court of India to officially cease partial or complete operations of pubs,
bars, clubs or any establishment that serve alcohol located within 500 metres Indiranagar’s 100 Feet Road
of national and state highways. Bengaluru’s key high streets - Brigade Road,
This is a favoured high street destination
MG Road and Church Street, which are home to the city’s famous pubs and
for local, national and international F&B
restaurants - came under the
retailers.
purview of this rule. As these
places witness strong demand Koramangala’s 60 Feet Road This road has gastropubs, micro-breweries,
and contribute to the state’s Replete with food joints - from the cafés, coffee shops, fast food chains
revenue, the state established classy fine dining destinations to and much more.
a new rule over the de- popular restaurants to small cafés More than 20 bars & pubs and
notified rule that exempts to street-side eateries. 50+ food joints are present along
pubs and bars within the city
F&B accounts for more than 80% a stretch of 2 km.
from the previous rule. This
of retail space on the road, the
clearly depicts the popularity
highest across any high street
of the pub culture in the city.
location in Bengaluru.

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Malls as a Cultural Destination Generation “Phygital”
• Malls as cultural destinations Bengaluru is experiencing the growth of “phygital” or omnichannel
Malls are not only places to shop but are also social and cultural destinations. retailing. Traditional brands are not limiting themselves to the bricks-
It is important that new and innovative experiences are regularly introduced and-mortar format of stores but are also selling through digital
to retain footfall. Mall operators have also realised that F&B is the key
Stock platforms to reach more customers.

10.8% 10
attraction and therefore they are getting the right eatery brands that cater to In addition, brands are selling through a digital platform as well as
specific taste buds, which will shape the quality of their visitors. opening their bricks-and-mortar experience stores in key high streets
• Malls within integrated developments of the city. This is although, countrywide, we are witnessing a good
The mall part of integrated developments or mixed-use developments is volume of retail space take up, with brands such as Pepperfry, Urban
known to witness increased footfall. Both UB City on Vittal Mallya Road
Vacancy million sq ft Ladder, LensKart and Caratlane taking up space in Bengaluru.
and Orion Mall at Malleshwaram are integrated along with office and hotel
projects and they witness good footfall. VR Mall on Whitefield Main Road has
of malls These stores are for supporting customers with a “touch and feel”
experience of the product and facilitating the process of ordering online.
both hotel and co-working space alongside its retail stores and restaurants. This trend is expanding the customer base of the online retail brands.

Omnichannel Retail
• Makes shopping an effortless experience
• Better pricing, as the cost of bricks-and-
mortar space is not loaded on the product
• Suits the busy lifestyle of the tech-savvy
population of Bengaluru
• Access to the best of two worlds
• More choices to offer

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Trends in the
Residential Market
Key Trends
• Uncertainty prevails - The Bangalore real estate sector is grappling amid the prevailing uncertainty brought in by the
implementation of Real Estate (Regulation and Development) Act (RERA) and Goods and Services Tax (GST). Developers are
working hard to comply with these policy changes while prospective buyers are adopting a wait and watch mode. Therefore, both
the demand and supply are becoming affected in Bengaluru.
• Infrastructure propels launches - Infrastructure developments such as new roads, flyovers and the metro rail are opening up
peripheral locations having good access to the IT hubs in the city for residential development. More than 9,000 units were launched
in the peripheral locations of Bengaluru in the first half of 2017.
• Best preforming sub-markets - East Bengaluru, which caters to the housing requirements of employees working in Whitefield
and along the Outer Ring Road, is currently the best performing market of the city with a sales rate of 8-10%. This sub-market has
the greatest advantage of all housing segments with reasonable market prices ranging from INR 2,500 to INR 8000 per sq ft. South
Bengaluru follows east Bengaluru as the second best performing market, again due to its close proximity to the IT clusters.
• Private Equity (PE) funding testing waters - Most funding for residential real estate at the moment is by debt refinancing. However,
a few PE investors are planning to invest in residential projects in Bengaluru. These PE funds are cautious and are only opting for
projects by reputable developers. Rising Straits Capital, Piramal Enterprises Ltd and Ivanhoé Cambridge are a few investors who are
planning to invest at the equity level in residential properties.

Co-Living & Student Housing

Affordable Housing
- Affordable housing witnessed good demand in
peripheral locations due to the availability of low-cost
land, FSI relaxation and gaining industry status, etc.
- In Bengaluru, affordable housing development was limited
around the proposed peripheral ring road. However, the
Bangalore Development Authority and the State Government
of Karnataka are identifying land within prominent locations
such as Whitefield, Gunjur, Kengeri and Hoskote and
developing affordable housing projects.
- After the affordable housing sector gained the status of
an industry, private developers started developing such
projects in proximity to industrial areas such as
Doddabalapur, Anekal and Attibele.
- Bengaluru is fast growing as a hub for
co-living and student housing projects due to
the presence of a large number of students and
young professionals.
- These are gaining popularity, as they provide
well-maintained, high-quality shared facilities at a
reasonable cost.
- Most of the co-living spaces in Bengaluru are
in the central parts of the city and in
locations such as Indira Nagar
and Koramangala.

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Opportunities in
Challenges
Bengaluru as a city finds opportunities in challenges. Despite the infrastructure challenges faced by the
city due to rapid urbanisation, the developers, companies and city authorities are developing innovative
solutions to face these problems.

• Developers and companies are partnering to create an improved employee experience.

• BMRCL is adding new metro trains along the routes with large numbers of commuters during peak
hours. They have also started operating short loop services between Kempegowda Metro Interchange
and RV Road and Indiranagar stations to help commuters to travel faster between busy stations.

• The busy lifestyles of tech-savvy professionals are paving the way for omnichannel retailing.

• The increased cost of office space is leading to the fast development of co-working spaces and
alternative workspaces for SMEs.

• The increased housing cost in core areas of the city is leading to the development of co-living and
shared living spaces for students and young professionals in the city.

• City authorities are working towards the development of affordable housing projects within the city.

• Private developers are exploring their opportunities in the affordable housing segment.

Every new challenge is an opportunity for innovating new solutions in Bengaluru. Therefore, as the city’s
population is estimated to be more than 14 million by 2021 and office stock is likely to be more than 135
million sq ft, Bengaluru is likely to see many more innovations in urban development and real estate.

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About JLL
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500
companyh, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of
$6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters,
and completed sales acquisitions and finance transactions of approximately $136 billion. At the end of the first quarter of 2017, JLL
had nearly 300 corporate offices, operations in over 80 countries and a global workforce of more than 78,000. As of March 31, 2017,
LaSalle Investment Management had $58.0 billion of real estate under asset management. JLL is the brand name, and a registered
trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com

JLL has over 50 years of experience in Asia Pacific, with 36,800 employees operating in 95 offices in 16 countries across the region.
The firm won the ‘World’s Best’ and ‘Best in Asia Pacific’ International Property Consultancy at the International Property Awards in
2016 and was named number one real estate investment advisory firm in Asia Pacific for the sixth consecutive year by Real Capital
Analytics and ranked among Fortune Magazine’s World’s Most Admired Companies list third year in a row. www.ap.jll.com

About JLL India

JLL is India’s premier and largest professional services firm specializing in real estate. With an extensive geographic footprint across
11 cities (Ahmedabad, Delhi, Mumbai, Bangalore, Pune, Chennai, Hyderabad, Kolkata, Kochi, Chandigarh and Coimbatore) and a
staff strength of 9,300 the firm provides investors, developers, local corporates and multinational companies with a comprehensive
range of services including research, analytics, consultancy, transactions, project and development services, integrated facility
management, property and asset management, sustainability, industrial, capital markets, residential, hotels, health care, senior
living, education and retail advisory. The firm was awarded the Property Consultant of the Decade at the 10th CNBC-Awaaz Real
Estate Awards 2015 and the Best Property Consultancy in India at the International Property Awards Asia Pacific 2016-17.

For further information, please visit www.jll.co.in

Authors
Trivita Roy Sushma Vemuri Kartheek Babu
Associate Director Senior Executive Senior Executive
Research and REIS Research and REIS Research and REIS
trivita.roy@ap.jll.com sushma.vemuri@ap.jll.com Kartheek.babu@ap.jll.com

For More Information About Research

Ashutosh Limaye
Head, Research and REIS
+91 98211 07054
ashutosh.limaye@ap.jll.com

jll.co.in

Jones Lang LaSalle © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation
or warranty is made to the accuracy thereof.
Bengaluru - Opportunities in Challenges