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This tracker has been compiled from external sources and does not necessarily reflect the views of the company. Links provided will take you to the full articles appended at the end of the file.

© 2008 Zenith Optimedia.

 

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Full Articles

 

 

33. Demand Slowdown Hits Office Space Market

7 August, 2008

 

With companies, particularly in the IT and BPO industry, holding back their expansion plans due to slowdown fears, the commercial real estate market posted a lacklustre show in the second quarter of 2008.

 

The June quarter saw office space demand lagging far behind the supply levels of 18.07 million sq. ft. across major cities, as companies turned cautious.

 

According to Cushman & Wakefield, the demand in the quarter was at 9.74 million sq ft, dominated by absorption (where companies move-in or begin fit-outs) of 6.36 million sq ft, and only 3.38 million sq ft in fresh pre-commitments. “There are certain micro-markets like Noida (NCR), and Rajiv Gandhi Salai (Chennai), which recorded excess supply for this quarter thus increasing the overall vacancy rates,” it said.

 

The second quarter witnessed stable rental values across micro-markets in the major cities with some central business district (CBD) and off-CBD locations witnessing rental hikes of 3-5 per cent over the last quarter. Some peripheral locations in NCR (National Capital Region) and Chennai, however, saw a correction in rentals largely due to excessive supply as well as deferred development plans of various proposed projects.

 

exceptions

 

Pune was an exception to the stable rentals where all micro markets saw a rise in rental values in the range of 2-7 per cent over the last quarter. Malad in Mumbai recorded the highest quarter-on-quarter rental appreciation at 11 per cent, due to lack of supply of Grade A properties and with most of the new supply already pre-committed. Dalhousie (Kolkata) too witnessed high rental increase of 10 per cent, due to high demand and lack of redevelopment potential or fresh supply.

 

Against a demand of 1.97 million sq ft in Bangalore during the June quarter, the supply stood at 3.11 million sq ft; whereas in Chennai the demand stood at 1.55 million sq ft (supply at 3.80 million sq ft). Hyderabad saw a demand of 0.47 million sq ft (0.75 m sq ft of supply), even as Mumbai logged an office space demand of 1 million sq ft (4.09 million sq ft supply). In NCR, compared to a demand of 3.30 million sq ft, the supply was at 4.34 million sq ft.

 

“There has been a slowdown in the actual transactions witnessed in the second quarter of 2008 owing to a number of factors, primary amongst which is a general slowdown of economy. However, the economic fundamentals of India are strong and we should expect demand pick-up by the fourth quarter of the year,” said Mr Kaustuv Roy, Director, Tenant Strategies & Solutions, India, Cushman & Wakefield.

 

 

 

34. High Mall Rentals Haunt Retailers

3 August, 2008

 

The heat is on. If the downturn in the residential sector was not enough, real estate developers are now fighting a losing battle to retain their retail clients in malls. High rentals, coupled with low conversion ratio, have forced retailers to issue a red card warning to mall developers - "either reduce the rentals or we are on our way out." According to reports with SundayET, at least 20-25 retailers have asked their mall developers to look at other options for their survival.

 

"The dynamics of the mall segment have changed in the last few years, as there is an oversupply of retail space in the country. With a fall in footfalls, the retailers are finding it tough to drive in customers to their malls," explains Anuj Puri, chairman of Jones Lang LaSalle Meghraj (JLLM).

 

The year saw the opening of a few mega projects that had been awaited eagerly by retailers and industry alike. Some of these projects had been able to justify the expectations of the retailers and customers, but by and large, most of them have not been able to deliver on the promises of high conversion ratios and revenues. High rental rates have put tremendous pressure on the topline and bottomline of most retailers, who had aggressively expanded into multiple stores in the same catchments, banking on the high growth rate of the economy.

 

According to Mr Kishore Biyani, CEO of the Future Group, due to the above factors, the group has changed its retail strategy for malls. "We are now operating on a revenue-sharing model in the malls. Earlier, we had issues with real estate developers, but now things have been sorted out. Productivity is a key factor for any retailer to operate efficiently in a mall, in case of a leased deal," he said.

 

With most malls offering lease terms of six to nine years and retailers being locked in for two to three years, with high initial investments and rental costs, the operational break-even has been stretched to the lock-in period for most of them. This combined with high inflation rates and strong undercurrents of imminent correction in the rentals have made the expansion plans of most of the retailers quite conservative and limited in the next four to six months.

 

Says Rajneesh Mahajan, director (retail) of Cushman & Wakefield India: "Most retailers want to wait and watch rather than commit to seemingly inflated rental rates even if it is at the risk of further increase in the rentals due to high land and project costs. Overall, the demand for retail real estate continues to remain strong with the influx of many international retailers and growing urbanisation in the country. However, this is focused on premium high streets and promising developments."

 

Interestingly, even as there is an oversupply in most of the micro markets, the supply of desired quality is limited to a handful of projects only and this has led to differentiated rentals being commanded by projects in the same micro market. The malls are getting the footfalls in, but conversion is seen mainly for entertainment, F&B and value brands. There are a few exceptions that have been able to offer a more sustainable rental model to retailers along with buoyant footfalls and sales.

 

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