Being Bangalored! Mapping IT City’s Realty Make-up

Bangalore Real Estate market by  Anshuma Magazine, Chairman and MD, CBRE South Asia Pvt Ltd.

Sustained demand for IT/ITeS office space has spurred the growth of commercial real estate in Bangalore, which has emerged as the leading city in terms of completed office space in the country. The city crossed a milestone in its office realty development curve last year, in fact, by becoming the first Indian office hub to have joined the club for 100-million-sq.ft. office markets across the globe. According to CBRE’s recently released Asia Pacific Investor Intentions Survey 2014—which gauges the appetite and outlook of real estate investors at a global level for the rest of the year—Bangalore has been ranked as the 9th most attractive city for investments among all groups of respondents for the survey—with international investors dominating this particular survey response. Interestingly, it happens to be the only city from India to feature among the top 10 most attractive cities for real estate investments in the Asia Pacific region.

The city is home to a highly cosmopolitan crowd, attracting migrants from all parts of the country. Between the Census 2001 and 2011, Bangalore’s population had nearly doubled from 6.5 million people to about 9.6 million. A continuously swelling population has understandably fuelled housing demand, with the city witnessing a record number of new residential launches during 2013. Furthermore, favorable demographics, rising per capita income, and the availability of quality retail space has led to Bangalore’s emergence as a favored retail destination, with a number of global and domestic retailers either setting up shop or expanding their footprint in the city. It has also functioned as the back office hub for international retailers like Target and Tesco, even before they explored front-end launches in the country; while global retailers like Metro Cash & Carry had been present in Bangalore long before spreading to other cities in India.

Office Space Update

Availability of quality office space at comparatively affordable rentals along with good connectivity and improved infrastructure has spurred demand for office space from corporate occupiers. In this regard, the Outer Ring Road (ORR) and Whitefield, in particular, have emerged as preferred options for corporate occupiers and market entrants. Meanwhile, North Bangalore has steadily emerged as a major development hub owing to its proximity to the international airport as well as to the city-center, and rapid infrastructure development. In 2013, Bangalore witnessed the absorption of approximately 7.4 million sq. ft. of commercial and SEZ space; while about 7.7 million sq. ft. of fresh office space came into the market. Although the IT/ITeS sector continued to drive demand for office space in the city, last year also witnessed steady demand from new sectors like the BFSI, research and consulting, engineering and manufacturing.

Bangalore’s upcoming office supply pipeline is dominated by a healthy mix of commercial and SEZ development. Going forward, transaction activity is likely to pick up along the ORR, owing to the fresh supply of quality commercial and SEZ space over the forthcoming quarters. North and South Bangalore markets are also likely to attract rising demand for office space. Rental values are likely to remain stable across most micro-markets in the short to medium terms. 

Housing Space

From being dubbed as a ‘pensioners’ paradise’, Bangalore has emerged as the hub of frenetic residential activity. Residential markets in Bangalore witnessed buoyant, albeit stable, growth over the fluctuating trends witnessed in the two largest residential markets of India—the Delhi National Capital Region and the Mumbai Metropolitan Region. Of the approximately 40,000 units launched in Bangalore in 2013, a large number of projects were in the affordable and mid-end housing segments. Residential demand is also expected to improve in the forthcoming quarters, which along with a steady supply pipeline may lead to strong capital appreciation in select locations. Ongoing and planned infrastructure projects such as the Metro Rail, Signal Free Outer Ring Road and Peripheral Ring Road, are likely to propel the housing investment market in the city too.The availability of land parcels along the Thanisandra–Hennur Road (North) and Horamavu belts (North East) are also likely to facilitate the launch of new housing projects, and help maintain a healthy supply dynamics in the city; while expansion in the IT sector is expected to keep feeding the city’s housing supply in the short to medium term..

Retail Development

Retail activity in the city has traditionally been restricted to popular high streets such as 100 Feet Road - Indiranagar, and Vittal Mallya Road. Bangalore’s CBD and off-CBD locations had historically been its retail epicenter, with Brigade Road, MG Road and Commercial Street being considered as prime high streets, characterized by mixed-use retail and small format stores. The same region experienced the introduction of large format shopping centers from the mid-2000s onwards, with malls such as The Forum in Koramangala (2004). Since then the city’s retail activity spread outwards (Phoenix Market City at Whitefield, and Brigade Orion at Malleswaram, for instance), in-line with the outward movement of its housing catchment in the peripheral markets.

During 2013, retailers from fashion, apparel and F&B segments continued to account for a significant chunk of leasing activity. Lack of fresh organized retail supply in the city resulted in demand for shopping space in the high street areas of Koramangala, Jayanagar, MG Road, Indira Nagar, Brigade Road, Commercial Street and New BEL Road. Wholesale retailing was a fast expanding format in the city last year. Conducive government regulations led to the entry of major cash-and-carry players, with several other brands lining up for an entry. Carrefour opened its first cash-and-carry format under the brand name, Carrefour Wholesale Cash & Carry, at ETA Mall (West). With the anticipated completion of three malls by H1 2014, around 1.1 million sq.. ft. of organized retail space is likely to become operational. Emerging locations in and around Bangalore are also expected to continue attracting occupier interest.

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