India Retail www.cbre.co.in India Overview The second half of 2011 witnessed increased transaction activity and a surge in retailer expansion across the country. Leading brands and retailers pursued their expansion plans aggressively, increasing their presence in the tier I as well as tier II and III cities of the country. Market expansion and opportunities in the organised retail industry led to a surge in supply of mall developments as well as retailer enquiries. A positive economic outlook in the first few months of 2011, besides a strong consumption expenditure outlook and rising sales led to a number of retail malls getting completed in the last six months of the year. Almost 9.6 million sq ft of organised retail mall supply was introduced into the market in the second half of 2011, compared to almost 6 million sq ft in the first half. This was led by Mumbai, Pune, Bangalore and Chennai, comprising of more than 90% of the entire organised mall supply during the review period. Large completions included Pheonix Market City, K Raheja Infinity Mall and Neptune Magnet Mall in Mumbai, MGF Metropolis in Gurgaon, Phoenix Market City and Ascendas Park Square in Bangalore. Most of these large developments were dominated by multiple anchor tenants in the form of hyper markets like Big Bazaar, Pantaloon, Shoppers Stop, Reliance Mart and Lifestyle leasing large retail zones at attractive rates. Lifestyle brand Zara opened its outlet in four of these newly complete properties, while Steuben opened its first outlet in Delhi. Couple of other vanilla retailers also expanded operations in these newly operational as well as old existing properties. The supply introduced into the market was a consequence of the positive sentiments amongst retailers on spatial expansion and enhancing their footprints across the country, even as transaction frameworks like minimum guarantee coupled with revenue share model became July - December 2011 more acceptable in the industry. Developers have also hedged their risks by developing retail as a part of integrated mixed use developments. The Phoenix Group introduced its Market City malls in Mumbai, Pune and Bangalore in the last few months, which are retail mixed use developments, comprising of entertainment, hospitality and commercial office space as other use types. In all the seven cities presented in this review, the retail real estate market appears to be promising with an increase in retailer enquiries. Retail mall rentals witnessed growth in prime city micro markets, while witnessing stability in suburban (supply laden) destinations in key cities like NCR, Mumbai and Bangalore. There was a market correction in select mall developments in few micro markets of Pune, Chennai and Hyderabad. This was a consequence of supply pressures, besides poor design and tenant mix in few properties. Moving ahead, transaction activity and size are expected to increase on the back of increase in consumer spending and expanding midincome purchasing power. However, despite an anticipated increment in demand, a downside remains in the form of huge retail mall supply pipeline in most leading cities. This might lead to a demand – supply mismatch which might eventually lead to long term pressures on retail rents in select micro markets. As urbanisation grows and cities continue to embrace organised retail, retailers have been expanding operations across the country. Leading brands have been opting for organised mall space, as well as standalone outlets on high street destinations. Retailer enquiries for prime high street retail spaces remained high during the review period and is expected to increase in the coming few months. The sustained increase in demand led to an escalation in rental values across most leading high street destinations. © 2011, CBRE, Inc. India Retail The retail industry reacted positively to the cabinet approval to foreign investment in multi brand retail in the country. While implementation of the proposal was delayed due to political pressures, it is expected that the coming few months might witness the proposal being introduced in a slow and phased manner. The move is likely to be implemented in leading retail hubs like Delhi and Mumbai and eventually move to other tier II and III cities in the country. The proposal seeks to amend supply side constraints in the retail industry while providing an immense opportunity to developers looking at reducing vacancy pressures in their existing properties. NCR Market Summary Despite volatile global cues, the Indian retail market displayed resilience and witnessed healthy growth levels throughout 2011. The Delhi-NCR retail market displayed a similar growth pattern, with many new international brands setting up base in the region. Existing brands continued to explore suitable opportunities for expansion, though keeping a firm eye on aspects such as sustainability and per store profitability. Various international brands expanded their presence in the city in the second half of 2011. These included Steve Madden at Ambience Mall in Gurgaon, Bebe at the Pacific Mall in Rajouri Garden and WH Smith at DLF Promenade in Vasant Kunj. Shoppers Stop expanded operations in North West Delhi, opening almost 48,000 sq ft of retail space housing brands such as Benetton, Tommy Hilfiger amongst others. Prominent brands that further strengthened their presence in the local market included Clarks (DLF Saket), KFC (Pacific Mall Rajouri Garden), Costa Coffee (DLF Promenade and Basant Lok Market), Puma (Mukherjee Nagar), Canon Image Square (Select City Walk), amongst others. July-December 2011 All prominent high streets across the city continued to remain high on the radar of retailers thereby leading to high levels of leasing enquiries from international as well as domestic brands. Setting up base on high streets has been a part of the strategy of retailers to cater to a wider consumer base as well as design marquee store formats. Some prominent flagship stores that opened during this review period include the Bestseller store in South Extension, Tanishq store on Bungalow Road, Kamla Nagar, HCL Flagship Store in Nehru Place and the Helios store in Connaught Place. Connaught Place continued to benefit from its centralised location and existing tenant mix, thereby witnessing a sustained retailer interest. Body Shop inaugurated its 1,000 sq ft store; while Tommy Hilfiger opened its hundredth store in India spread over 2,000 sq ft in F block in November. In the luxury retail market, renowned American home and lifestyle brand Steuben launched operations in India with its first store at DLF Emporio in Vasant Kunj. Another notable announcement was the planned entry of the french women's footwear brand Christian Louboutin in India with a store being considered at the DLF Emporio. Diesel Black Gold, the luxury range of Diesel, is also expected to open its exclusive India boutique at the luxury mall destination. DLF Emporio also witnessed the well-known home and lifestyle domestic format OMA launching its fine dine concept called AUMA, adding a new product category to its offering. On the supply side, the second half witnessed the completion of MGF Metropolis in Gurgaon. The mall is spread over an area of 0.65 million sq ft and has Lifestyle and Spar as the key anchor tenants. Rental Trends Rental values remained stable in most of the micro markets in the Delhi-NCR market due to limited supply and steady demand. However, the mall cluster in Vasant Kunj witnessed a rental appreciation in the range of 10-11% as compared to the first half of 2011. These two premium retail destinations are considered a priority market for expansion by various global and Indian retailers. In the suburbs, Noida remained stable due to subdued demand, while Gurgaon witnessed a rental Page 2 © 2011, CBRE, Inc. Major Leasing Transactions Tenant Mall Clusters 350 300 Rentals ( INR/sq ft/month) 250 200 India Retail appreciation of around 14-15%. Gurgaon is the hub of office stock, besides a key residential destination for professionals and expatriates, hence, a focal destination for leading retail brands. High street rentals witnessed steady growth in key markets such as Connaught Place and South Extension in the range of 4 -8% respectively, owing to sustained demand for such traditional retail destinations. 150 100 50 Building Approx. size (in sq ft) Location Diesel Black Gold First Floor, DLF Emporio Vasant Kunj, New Delhi 1,920 Steve Madden Ground Floor, Ambience Mall Gurgaon 2,000 Dominos Pizza Basant Lok Shopping Complex Basant Lok, New Delhi 2,000 Helios E Block, Inner Circle Connaught Place, New Delhi 2,600 Bebe Ground Floor, DLF Promenade Vasant Kunj, New Delhi 3,400 0 H2 2009 H1 2010 Saket District Centre HIGH STREET RENTALS High Street Average rental (Jul – Dec ‘11) INR/sq ft/month Average rental (Jan – June ‘11) INR/sq ft/month Khan Market 1100-1200 1100 - 1200 South Extension 700-800 600 - 750 Basant Lok 300-350 250 - 350 Connaught Place 600-700 550 - 700 High Streets 1,400 Rentals ( INR/sq ft/month) 1,200 1,000 800 600 400 200 0 H2 2009 Khan Market H1 2010 H2 2010 South Extension H1 2011 Basant Lok H2 2011 H2 2010 Vasant Kunj H1 2011 Noida H2 2011 Gurgaon Outlook The Government has been taking positive steps towards permitting foreign direct investment in multi brand, as well as single brand retail. While the implementation of the move might have been delayed due to political pressures, this is likely to influence developers to adopt a 'staggered' approach towards leasing new space in their premium properties. Developers might hold onto vacant space in their developments for premium international retail brands, which might lead to limited churn in prime retail space in the next few months. As micro markets such as Gurgaon and Noida witness an increase in population levels, international hypermarket retailers are evaluating the potential of these locations for setting up base. A host of developers are finalising projects in anticipation of demand from such retail developments, which is likely to lead to a rental rally in the near future. Connaught Place Mumbai ORGANISED RETAIL RENTALS Average rental (Jul – Dec ‘11) INR/sq ft/month Average rental (Jan – June ‘11) INR/sq ft/month Saket District Centre 275-375 275-375 Vasant Kunj 200-300 200-250 Noida 150-250 150 - 250 Gurgaon 150-250 125-225 Market Summary Mumbai witnessed heightened activity in its retail market in the second half of 2011, with an increase in absorption of large format as well as vanilla retail spaces in high street locations and newly launched malls. While demand for prime retail space continued Page 3 © 2011, CBRE, Inc. July-December 2011 Mall Clusters Around 4 million sq ft of mall supply (mainly concentrated in the Central/Eastern suburbs) was released in Mumbai in the second half of 2011. The second half of 2011 witnessed malls such as Market City in Kurla (1.6 million sq ft), R - City Phase II in Ghatkopar (W) (0.5 million sq ft), Magnet Mall in Bhandup (W) (1 million sq ft) and Infinity Mall at Malad (W) (1 million sq ft) becoming operational. During the review period, high street locations witnessed an increasing demand from retailers, with the likes of Celio, Presto and Mango (relocation) opening stores in Linking Road. Other high street locations such as Juhu Tara also witnessed space take up from retailers such as Edible Arrangements, Flight Shop and Yogurberry. Various brands opened their first stores in the city, like OVS, Bebe, Queue Up, Alcott and Boggi Milano at Infiniti Mall in Malad and Timberland, Paul & Shark and L'Occitane at High Street Phoenix. Amongst the other notable retail transactions in the city was the first stand alone hypermarket store by Reliance Retail, measuring approximately 80,000 sq ft and spread over four levels on S.V Road, Santa Cruz (W). In the cash and carry segment, Metro Cash And Carry India opened its second outlet, spread over 60,000 sq ft, in Borivali (E) on the Western Express Highway. Banks were also key occupiers of retail property in major locations, with retail banking branches at a spread of 2,500-5,000 sq ft being opened in various locations. Yes Bank opened its branch on S.V Road in Khar (W) and IndusInd Bank inaugurated branches at Prabhadevi, Linking Road and Khar. Rental Trends Steady demand levels and limited supply led to a marginal rental increment of almost 2-3% in leading high street locations in the city. Retailer enquiries increased in emerging markets of Andheri and Borivali on S.V Road stretch which led to an upward movement in rental values in these locations. In the organized retail mall segment, rental values in Central Mumbai and Western suburbs witnessed an increment of almost 15-20% due to limited supply and churn of Grade A space in these markets. However, rental values in the Eastern Suburbs appreciated marginally, due to large supply addition and a significant pipeline of vacant space in new developments. Major Leasing Transactions Building Location Approx. size (in sq ft) Bebe Infiniti Mall Link Road, Malad (W) 3,000 Smoke House Deli High Street Phoenix Lower Parel 3,500 The Irish House High Street Phoenix Lower Parel 3,500 OVS Infiniti Mall Link Road, Malad (W) 6,000 Bharti Walmart Magnet Mall LBS Marg, Bhandup (W) 32,000 Tenant HIGH STREET RENTALS High Street Average Rental (Jul – Dec ‘11) INR/sq ft/month Average Rental (Jan – June ‘11) INR/sq ft/month Linking Road 650-900 600-900 Colaba Causeway 470-500 450-500 Kemps Corner 450-475 425-450 High Streets 900 800 700 Rentals (INR/ sq ft/ month) India Retail to remain strong in traditional markets such as Linking Road, Colaba CauseWay and Breach Candy, new locations such as Borivali, S.V Road (stretch from Santa Cruz West to Andheri West) as well as Chembur gained prominence amongst retailers like Reliance, KFC, Louis Philippe and Titan. The attractiveness of these new markets is driven by the lack of availability of quality organized retail mall space in proximity to these locations, which boast of a large catchment having a high propensity to spend. 600 500 400 300 200 100 0 July-December 2011 H2 2009 Linking Road H1 2010 H2 2010 Colaba Causeway H1 2011 H2 2011 Kemps Corner Page 4 © 2011, CBRE, Inc. ORGANISED RETAIL RENTALS Average rental (Jul – Dec ‘11)I NR/sq ft/month Average rental (Jan– June ‘11) INR/sq ft/month Central Mumbai 400-600 375-500 Western Suburbs 200-350 185-275 Eastern Suburbs 170-250 160-250 Mall Clusters 600 Established high street locations continued to witness mid size transactions during the quarter. International apparel brand Avirati forayed into the city by leasing 3,800 sq ft of retail space at Indira Nagar. In the emerging market of Kamanahalli, McDonald’s and Tanishq leased 2,200 sq ft and 5,800 sq ft of retail space respectively. Rentals (INR/ sq ft/ month) 500 400 300 200 100 0 H2 2009 H1 2010 Central Mumbai H2 2010 H1 2011 H2 2011 Western Suburbs(Andheri/ Goregaon / Malad) Eastern Suburbs (Kurla/Ghatkopar/Bhandup) Outlook Prime high street locations and Grade A mall developments will continue to witness an increase in interest from retailers planning an expansion in the city. New developments such as Phase-II of R-City at Ghatkopar, Magnet Mall at Bhandup, Infiniti-II at Malad and Market City at Kurla, all in the Eastern Suburbs of Mumbai have commenced operations, and are expected to witness leasing of large vacant space in the next 6-8 months. Vivacity with over 1 million sq ft of retail space in Thane is expected to be operational in the next few months and is expected to contribute to supply pressures in the city. Rental values are expected to stabilize or increase marginally, keeping in mind the demand trends of domestic as well as international brands, besides the extent of pipeline in various micro markets. Bangalore Market Summary Bangalore witnessed completion of almost 1.6 million sq ft of organised mall space during the last six months. Two major malls were completed in the micro market of Whitefield. The Market City mall (2.5 million sq ft of mixed used development) developed by the Phoenix Group has major retailers like Zara, Nautica, Sbarro, Aldo, Hush Puppies, Timberland and Big Bazaar. The ITPL campus at Whitefield developed by Ascendas launched the Park Square Mall (0.45 million sq ft) within its campus with a built-in access for its employees. Major brands like Habanero, Reliance Trends, The Hive, Centrum, Urbana, Soles, Via, Indigo Nation and Space along with Q Cinemas (multiplex) and Amoeba (gaming) have leased space in this mall. Another notable mall development was the Signature Mall (0.2 million sq ft) by the Gopalan Enterprises located at Old Madras Road which is one of the major retail developments on this stretch. Retailers like Shoppers Stop, Adidas, Derby, Puma, Nike, Swarovski, Titan, Lifestyle, Odyssey, Blackberry's, Pantaloon, Whizz and W are some of the key tenants in this mall. Bangalore also witnessed the opening of hyper markets like MORE Mega store (Aditya Birla Retail Limited), Big Bazaar (Upscale format from Future Group) and Easy Day (Bharti - Walmart). International brands like Avirati, Porsche, Hush Puppies and Habanero also established operations in the city during this period. Preleasing activities was evident in the Orion Mall at Page 5 © 2011, CBRE, Inc. July-December 2011 The retail market in Bangalore was largely buoyant in H2 2011, due to various elements ranging from steady India Retail Mall Clusters stream of new mall/retail developments emerging in the market space and also active leasing activities by both vanilla brands and anchor formats in established and emerging high streets. Rental values across all key markets witnessed an increase, largely driven by the demand-supply dynamics of the retail market in the city. Rajajinagar and Vega City at Bannerghatta Road which would be operational in 2012. The 1MG Road mall located in the CBD has also witnessed substantial absorption prior to its launch which reflects optimum demand for organised retail space across Bangalore. High Streets 350 Rental Trends 250 200 150 100 50 The micro markets of Indiranagar and Brigade Road recorded a rental increase of 8-9%, although anchor retailers continued to lease at discounted pricing, with a combination of minimum guarantee or revenue share models in place. Incremental demand for high street retail space in the emerging locations of BEL Road and Kammanahalli led to an increase of 12-16% in rental values during the review period. Operational malls located in the CBD continued to witness an increment in rental values, due to healthy absorption and enhancing footfalls, even as rental stability was witnessed in under construction properties. South Bangalore witnessed a steep increment in rental values due to encouraging preleasing in the Vega City mall, which is currently under construction at Bannerghatta Road. There was a marginal decrease in rental values at Whitefield due to supply pressures and increased availability of mall space in this micro-market. The Outer Ring Road witnessed a rental appreciation of 12-15% during this period, largely driven by an increase in demand levels in this micro market. Major Leasing Transactions 0 H2 2009 H1 2010 H2 2010 H1 2011 H2 2011 Brigade Road Jayanagar 11th Main 4th Block Commercial Street 100 Feet Road, Indiranagar Kammanahalli /HRBR Layout New BEL Road ORGANISED RETAIL RENTALS Mall Clusters Average Rental Values (July – Dec 11) INR/sq ft/month Average Rental Values (Jan – June 11) INR/sq ft/month CBD/Off CBD 140-180 120-180 South Bangalore (Koramangala/Jayanagar) 140-180 100-110 East Bangalore (Airport Road, Ulsoor, Whitefield) 75-85 80-90 ORR 70-80 60-70 West Bangalore 100-120 100-120 Mall Clusters 200 Rentals (INR/ sq ft/ month) India Retail Rents (INR/sq ft/month) 300 150 100 50 0 Tenant Building Location Approx. size (in sq ft) InMark Retail Stand Alone Guard CR Road (CBD) 15,000 Coupon Mall Stand Alone Bannerghatta Road (South) 22,000 Reliance Digital Brigade Solitaire Residency Road (CBD) 22,000 HIGH STREET RENTALS July-December 2011 High Street Average Rental Values (July – Dec 11) INR/sq ft/month Average Rental Values (Jan – June 11) INR/sq ft/month Commercial Street 230-250 225-275 Brigade Road 275-325 250-300 Jayanagar 11th Main 4th Block 150-180 150-180 100 Feet Road, Indiranagar 130-160 120-140 New BEL Road 100-120 90-100 Kammanahalli /HRBR Layout 90-100 80-90 H2 2009 CBD /Off CBD H1 2010 H2 2010 H1 2011 H2 2011 South Bangalore (Koramangala, Jayanagar) East Bangalore (Airport Road, Ulsoor,Whitefield) ORR Outlook Bangalore has been an attractive market for expansion of leading brands and large scale hyper markets, and is likely to remain the same in the coming few months. Prominent high streets will continue to attract higher rentals due to an expanding retailer base and sustained footfalls. Bangalore is also witnessing growth in the emerging high streets primarily in the North and East regions of the city. The completion of retail developments like the Orion Mall by Brigade Group at Rajajinagar, 1MG Road by GCorp and Starcentres at MG Road Page 6 © 2011, CBRE, Inc. Chennai Market Summary Construction activity in the retail segment picked up pace in the second half of 2011 due to increase in demand from retailers both in CBD and Off CBD locations. Majority of the developers and large scale land owners are coming up with new constructions with larger floor plates while few land owners are willing to go ahead with BTS (Built-to-suit) options in order to cater to enhanced demand levels from retailers. During the last 6 months, most of the construction activity was limited to high street locations such as Nelson Manickam Road, Poonamallee High Road, Adyar, TTK Road, North Usman Road and Velacherry. Approximately 300,000 sq ft of retail space was released during the last six months in this micro market. being the anchor tenant occupying almost 45,000 sq ft. Food courts and other vanilla brands such as Helvetica, Time Factory, Denizen and Cafe Coffee Day have also occupied retail space in the mall. Chennai retail market is expected to witness the completion of almost 2.6 million sq ft of mall space by the end of second half of 2012. This supply influx would be led by properties like Grand Mall (200,000 sq ft by PS Srijan Group on Velacherry Main Road); Forum Mall (600,000 sq ft by Prestige Group at Vadapalani); Junction Mall (800,000 sq ft by MARG Group at Karappakkam, OMR) and Market City (1 million sq ft by Phoenix Mills in Velacherry). Rental Trends Rental values on high street locations of Nungambakkam High Road, T Nagar and Anna Nagar remained stable, while those in Adyar and Velacherry depreciated by almost 20% and 11% respectively. On the other hand, Alwarpet observed a rental increment of 12-13% during the review period, largely attributed to an increase in demand for large retail spaces, ready fit out options and built to suit proposals in upcoming projects. . Rental values witnessed pressures in retail mall properties, with a decline of almost 30% in Spencer Plaza (Anna Salai) and around 5-10% in Chennai Citi Center, Ampa Skywalk Mall and Express Avenue. A key reason for drop in mall rentals has been reducing sales and declining footfalls, largely attributed to an unfavorable tenant mix and poor infrastructure facilities in these malls. In terms of organised retail, Coromandal Plaza (spread over an area of close to 400,000 sq ft in OMR, Navallur) commenced operations in July 2011, with AGS Cinemas being the key anchor tenant besides food courts and other vanilla retailers. Another mall which became partially operational during this review Major Leasing Transactions Tenant Building period is Spectrum Mall at Perambur with leasable area of around 300,000 sq ft. Big Bazaar is a key Titan Standalone tenant in this mall, having occupied around 60,000 sq Planet Fashions Standalone ft of retail space . LG Showroom Standalone Location Approx. size (in sq ft) Shanthi Colony 2,500 Kodambakkam High Road 2,500 Nungumbakkam High Road 6,000 Louis Phillippe Standalone Anna Nagar, 2 Avenue 10,000 @homes Standalone Gandhi Nagar 1 Main Road, Adyar 16,000 Cinepolis BTS OMR, Thoraippakkam 18,000 Reliance Trends Standalone Adyar 26,500 LifeStyle Standalone Nelson Manickam Road 60,000 nd st Page 7 © 2011, CBRE, Inc. July-December 2011 Additionally, Ramee Mall located at Teynampet, Anna Salai with a leasable area of 200,000 sq ft is expected to become operational by the end of December 2011. This is a key retail property in the city integrated to a Five Star Hotel (Hyatt Regency) with Shoppers Stop India Retail and Inorbit Mall by Raheja Group at Whitefield is likely to add almost 1.3 million sq ft of mall space in 2012. Home grown Indian corporate houses have lined up ambitious expansion plans for the next financial year and are further being promoted by various PE funds/companies that are increasingly making their presence felt in the Indian retail space. Outlook Average Rental Values (Jan – June 11) INR/sq ft/month Nungambakkam High Road 130-170 140-160 T Nagar - Pondy Bazzar 140-160 140-160 Anna Nagar - 2nd Avenue 90-130 90-130 Velachery 70-90 80-100 Adyar 100-130 130-160 Alwarpet 120- 140 100-130 India Retail High Street Average Rental Values (July – Dec 11) INR/sq ft/month The retail real estate market in Chennai is expected to maintain an optimistic trend over the next few months. This is largely due to increase in demand from retailers and release of quality supply in the near term. Rental values are expected to witness an increase in select developments in the CBD / Off CBD micro markets, while remaining stable elsewhere. Hyderabad High Streets 160 Market Summary 140 Rentals (INR/sq ft/ month) 120 100 80 60 40 20 0 H2 2009 H1 2010 H2 2010 Nungambakkam High Road Velachery H1 2011 T Nagar - Pondy Bazzar H2 2011 Anna Nagar - 2nd Avenue Adyar Alwarpet ORGANISED RETAIL RENTALS Mall Clusters Average Rental Values (July – Dec 11) INR/sq ft/month Average Rental Values (Jan – June 11) INR/sq ft/month Spencer Plaza (Anna Salai) 80-100 120-140 Chennai Citi Center (RK Salai) 140-160 140-180 Ampa Skywalk Mall (Poonamalle High Road) 170-190 180-200 Express Avenue (Royapetah) 190-210 210-230 Mall Clusters 250 Rentals (INR/sq ft/ month) 200 Himayat Nagar witnessed low transaction activity due to lack of ready supply. However, Max and Reliance pre-committed approximately 30,000 sq ft of retail space in the only under-construction stand alone development in the micro market, which is expected to be delivered by the end of 2012. Also, Tanishq launched a 12,000 sq ft stand-alone store in this micro market. Around 150,000 sq ft of fresh supply was released in the high street locations of Banjara Hills and Jubilee Hills during the second half of 2011. However, no new mall developments were completed during this review period in Central Hyderabad and Western Suburbs. Emerging micro markets of Habsiguda and AS Rao Nagar witnessed interest from retailers already present in other major micro markets in the city. United Colors of Benetton (UCB) leased around 2,500 sq ft in an independent building in this micro market during this review period. 150 100 50 0 H2 2009 Location and tenant mix continued to attract retailers to the high street locations of Banjara Hills and Jubilee Hills in Hyderabad. Retailers such as Steve Madden and Ebony Gautier launched their first stores at Jubilee Hills Road No. 36 during this period. In addition, brands like Canon Image Square, Laven Fashions, Timberland, Nature's Basket and Quiznoz are expected to open up their stores in this micro market by the year end. H1 2010 July-December 2011 Spencer Plaza (Anna Salai) H2 2010 H1 2011 H2 2011 Chennai Citi Center (RK Salai) Ampa Skywalk Mall (Poonamalle High Road) Express Avenue (Royapetah) Hitec City Main Road, now considered an emerging high street location in the city, with a large Page 8 © 2011, CBRE, Inc. concentration of office stock, has been attracting various F&B brands such as Mainland China, Venky's and Papa John's Pizza. Most of these brands opened their outlets on this stretch during this review period. Manjeera Group introduced Manjeera Majestic, a Grade A mixed use development with almost 60,000 sq ft of retail component, in Kukatpally. The retail space in this development has witnessed substantial precommitment, with retailers like Spykar, Gitanjali Jewels and Kalanjali committing spaces. Additionally, brands like PUMA, Manyavar and Arvind Brands have opened independent stores in Kukatpally during the second half of 2011. While rental values appreciated by almost 4-5% in the high street location of Himayat Nagar, stability was observed in most of the other high street locations like Banjara Hills and Jubilee Hills. Rental values in Central Hyderabad and Western Suburbs also remained stable due to lack of fresh retail supply addition and very low rate of churning. India Retail While there was negligible supply addition in the organised retail segment in the past few months, supply pipeline appears strong for the next 2-3 years. Some of the major under construction malls include Manjeera Trinity (440,000 sq ft by Manjeera Retail Holdings Pvt Ltd) in Kukatpally, TNR Estate (385,000 sq ft by TNR Constructions) in Kompally, Soma Mall (700,000 sq ft by Soma Developers) in RTC Cross Roads, Prestige Forum (850,000 sq ft by Prestige Constructions) in Kukatpally and City Capital Mall (700,000 sq ft by Skill Promoters) in Kondapur. Rental Trends Major Leasing Transactions Tenant Building Location Approx. size (in sq ft) Ebony Gautier Stand Alone Jubilee Hills(CBD) 15,000 Spencer’s Stand Alone Attapur (SBD) 20,000 Shopper’s Stop/ Hypercity TNR Estate Kompally(PBD) 100,000 HIGH STREET RENTALS High Street Average Rental Values (July – Dec 11) INR/sq ft/month Average Rental Values (Jan – June 11) INR/sq ft/month Himayat Nagar 110-120 105-115 Jubilee Hills Road No 36 130-140 130-140 Banjara Hills Road No 1 120-130 120-130 High Streets 160 140 Similarly, anchors like PVR, Star India Bazaar, Westside, SPAR and Zara have also pre-committed large spaces in other under-construction mall developments. Such large scale pre-leasing by anchor tenants reflects the attractive quotient of the city and a positive outlook for the retail market. Rentals (INR/ sq ft/ month) 120 Healthy pre-commitment has been witnessed in other under-construction properties like Manjeera Trinity (Cinepolis and SPAR have taken around 100,000 sq ft of anchor spaces as multiplex and hypermarket operators) and TNR Estate (Shopper's Stop has committed around 100,000 sq ft). Additionally, retailers such as Lifestyle, Star Bazaar and Cinepolis have committed almost 200,000 sq ft of retail space in Soma Mall in RTC Crossroads. 100 80 60 40 20 0 H2 2009 Himayat Nagar H1 2010 H2 2010 Jubilee Hills Road No. 36 H1 2011 H2 2011 Banjara Hills Road No.1 ORGANISED RETAIL RENTALS Average Rental Values (July – Dec 11) INR/sq ft/month Average Rental Values (Jan – June 11) INR/sq ft/month Central Hyderabad (Banjara Hills, Panjagutta) 60-70 60-70 Western Suburbs (Cyberabad, Kukatpally) 45-47 45-47 Mall Clusters © 2011, CBRE, Inc. July-December 2011 Page 9 Swarovski, Zara, Steve Madden, Timberland and Clarks opening their first stores in the city. Other retailers which opened stores included Diesel (Phoenix Market City), Star Bazaar (opened up second hypermarket in Phoneix Market City Mall) and Hypercity (first hypermarket outlet in Pacific Mall). Mall Custers 70 India Retail Rentals (INR/ sq ft/ month) 60 50 40 30 20 10 0 H2 2009 H1 2010 Central Hyderabad (Banjara Hills, Panjagutta) H2 2010 H1 2011 H2 2011 Western Suburbs (Cyberabad, Kukatpally) Outlook High street locations of Banjara Hills and Jubilee Hills would continue to attract retailer interest and witness sustained demand. This is likely to enhance transaction activity in such high street destinations. Similarly, the organised retail segment is likely to attract retailer interest in under-construction mall developments. Retailers would be looking for expanding their presence in these underconstruction properties, as most of them are nearing completion. Additionally, high street locations in Fatima Nagar, Bund Garden Road and FC Road witnessed retailers such as Reliance Digital, Sony, Canon, X Shoes and Peter Pan taking up retail space during this review period. Rental Trends Enhanced demand levels and lack of retail space led to a rental increment of almost 9-10% in MG Road, the most preferred high street location in the city. However, rental values remained stable in other high street destinations like JM Road, Aundh and Koregaon Park, largely due to limited availability of good quality retail space. On the other hand, despite healthy absorption, the influx of a large supply pipeline led to a decline of almost 5-6% in rental values across the Eastern corridor of Nagar Road, Koregaon Park/Bund Garden Road. This was evident in operational as well as upcoming mall developments. Pune Major Leasing Transactions Market Summary The organised retail mall market witnessed an increase in absorption of retail space due to scarcity of quality retail supply in high street locations such as MG Road, JM Road and Aundh Road, besides affordable rental values. As a result, mall developments witnessed absorption of almost 0.3 million sq ft of retail space during this review period, which was an increase from the previous review period. Tenant Building Location Approx. size (in sq ft) M&S Amanora Mall Hadapsar 7,000 Reliance Digital Amanora Mall Hadapsar 10,000 Ranka Jewellers Stand Alone Sinhgad Road 25,000 Shopper Stop Pacific Mall Swar Gate 40,000 Spar Phoenix Mall Viman Nagar 45,000 Hypercity Pacific Mall Swar Gate 50,000 HIGH STREET RENTALS July-December 2011 Amongst the key developments that came on stream included Amnora Mall by City Group in Hadaspar, with a leasable area of around 1 million sq ft. Besides Phoneix Market City (1 million sq ft) by Ruia Developer in Viman Nagar and Pacific Mall (500,000 sq ft) by Kumar Properties at Swar Gate. These malls witnessed entry of large number of premium brands such as High Street Average Rental Values (July – Dec 11) INR/sq ft/month Average Rental Values (Jan – June 11) INR/sq ft/month MG Road 250-270 225-250 JM Road 250-275 250-275 Aundh 100-120 100-120 Koregaon Park 100-150 100-150 Page 10 © 2011, CBRE, Inc. High Streets Kolkata 250 Market Summary 200 Despite the current economic scenario, with most brands adopting a cautious approach towards expansion especially into tier 2 markets, the Kolkata retail market displayed healthy growth levels. There was no fresh supply that came on stream in the second half of 2011. Most brands held onto their current positions and new brands evaluated entry into the city in primarily established mall developments such as South City Mall and Forum/Forum Courtyard. 150 100 50 0 H2 2009 MG Road H1 2010 H2 2010 JM Road H1 2011 Aundh H2 2011 Koregaon Park India Retail Rentals (INR/ sq ft/ month) 300 ORGANISED RETAIL RENTALS Mall Clusters Average Rental Values (July – Dec 11) INR/sq ft/month Average Rental Values (Jan – June 11) INR/sq ft/month MG Road 200-250 200-250 Nagar Road 100-125 100-140 Koregaon Park/ Bund Garden Road 100-125 100-140 Mall Clusters 250 Rentals (INR/ sq ft/ month) 200 150 100 50 0 H2 2009 MG Road H1 2010 Nagar Road H2 2010 H1 2011 H2 2011 Koregaon Park/ Bund Garden Road Outlook Vacancy levels were low in most leading mall developments as there was no new addition to the premium mall space in the city; while in prime city locations the vacancy levels are expected to remain low due to high demand from retail brands looking at expanding operations. On the other hand, vacancy levels in the suburban locations might witness supply pressures, and as a result remain high, as large scale supply gets added into the market in the next few months by the completion of projects such as Forum Howrah (200,000 sq ft by Forum Group) at Bhowanipore and Acropolis Mall (300,000 sq ft is a PPP between Kolkata Metropolitan Development Authority (KMDA) and Merlin Projects Ltd) at RB connector in South Kolkata. Rental Trends Rental values displayed an upward trend across most micro markets, led by sustained demand and lack of fresh supply. High streets such as Elgin Road, Camac Street and Shakespeare Sarani witnessed a rental appreciation of approximately 9-10% compared to the previous review period. In terms of organised retail, the Page 11 © 2011, CBRE, Inc. July-December 2011 Limited supply of quality retail space, despite high demand and footfalls, might lead to retailers occupying spaces in new mall developments. This might restrict rental escalation in high street destinations in the city. On the other hand, a substantial supply pipeline of almost 1.15 million sq ft is likely to be released in the retail mall segment, led by Koregaon Park Plaza, Koregaon (500,000 sq ft) and Magarpatta Season's Mall, Magarpatta City (650,000 sq ft). This might continue to restrict rental values in mall developments across the city. New international brands that expanded operations in the city include US Polo Association and Chicco with flagship stores at South City Mall. IT giant Apple launched its 1,200 sq ft stand alone store on Park Street. Leading fashion and lifestyle brands continued to display an inclination towards prime mall space, while those in the F&B category explored high street options as well. Salt Lake market observed a rental increment in the range of 5-6%, while Jadavpur observed an increase of almost 10-11%, owing to sustained demand for space at the South City Mall. ORGANISED RETAIL RENTALS Average Rental Values (July – Dec 11) INR/sq ft/month Average Rental Values (Jan – June 11) INR/sq ft/month E M Bypass 130-150 130-150 Salt Lake 260-280 250-260 Jadavpur 250-275 225-250 Major Leasing Transactions Approx. size (in sq ft) Tenant Building Location US Polo Association South City Mall Jadavpur 1,000 Apple High Street Park Street 1,200 Forever New South City Mall Jadavpur 2,550 Reliance Jewels High Street Park Street 6,000 HIGH STREET RENTALS Average Rental Values (July – Dec 11) INR/sq ft/month Average Rental Values (Jan – June 11) INR/sq ft/month Park Street 280-310 280-310 Elgin Road 210-230 190-210 Camac Street, Shakespeare Sarani 210-230 190-210 High Street Mall Clusters 300 250 Renta (INR/sq ft/month) India Retail Mall Clusters 200 150 100 50 0 H2 2009 E M Bypass 300 Rens (INR?sq ft/month) 250 200 150 100 50 0 H2 2009 Park Street H1 2010 Elgin Road H2 2010 H2 2010 Salt Lake H1 2011 H2 2011 Jadavpur Outlook High Street Rentals 350 H1 2010 H1 2011 H2 2011 Camac Street, Shakespeare Sarani More than 2 million sq ft of prime retail space is expected to come on stream in Kolkata in the year 2012 as developments such as the Forum Howrah Mall and Acropolis Mall near completion. With new brand launches planned at these developments, the local retail real estate market is expected to gain impetus. New retail categories such as entry level luxury are expected to make a debut at the Spencer's Galleria, thereby leading to an enhanced retail experience for consumers. With most of the new developments commencing operations in 2012, an increase in retailer enquiries and a possible increment in rental values is expected in leading micro markets of the city. July-December 2011 Page 12 © 2011, CBRE, Inc. List of Completed Retail Developments in H2 2011 Project Developer Location 1,600,000 Reliance, Zara, Lifestyle, Pantaloon, PVR 1,000,000 Easy Day, McDonald's, Bata Market City Phoenix Magnet Mall Neptune Group Infinity Mall -2 K-Raheja Constructions Phoneix Market City Ruia Developer (Market city) Market City Phoenix Mills MGF Metropolis MGF Group R-City, Phase-II Runwal Builders Amanora Mall City Group Hadapsar, Pune 500,000 Pacific Mall Kumar Properties Swar Gate, Pune 500,000 Park Square Ascendas Whitefield Road, Bangalore Coromandal Plaza Suryavardhan Estates Spectrum Mall Ganga Foundations Lala Towers Ramaniyam Dev. Signature Mall Gopalan Ramee Mall Ramee Hoteliers ISANA Building Kattimma - Group Acme Acme Group Mahadevapura, Bangalore Gurgaon Ghatkopar(W), Mumbai OMR, Chennai Perambur, Chennai Nelson Manickam Road, Chennai Old Madras Road, Bangalore Teynampet, Anna Salai, Chennai Poonamallee High Road, Chennai Santa Cruz (W), Mumbai Key Tenants 1,000,000 1,000,000 900,000 650,000 500,000 Zara, Westside, Reliance, Future Group Star Bazaar, West side, Pantaloons, Reliance, Landmark Zara, Nautica, Sbarro, Aldo, Hush Puppies, Timberland, Big Bazaar SPAR, Lifestyle Westside, Shopper's Stop, Madura Garments, Kidzania Reliance Digital, Central, Big Bazaar, Marks & Spencers Hypercity, M &S 400,000 Habanero, Reliance Trends, Amoeba, The Hive, Centrum, Urbana, Soles, Via, Indigo Nation, Space, Q Cinemas AGS cinemas 300,000 Big Bazaar 287,072 Life Style 200,000 Shoppers Stop, Adidas, Derby, Puma, Nike, Swarovski, Titan, Lifestyle, Odyssey, Blackberry's, Pantaloon, Whizz, W 200,000 Shoppers Stop 124,456 Mega Mart 80,000 Reliance Mart – Hypermarket 450,000 India Retail Kurla (W), Mumbai Bhandup, Mumbai Malad (W), Mumbai Viman Nagar, Pune Area (in sq ft) © 2011, CBRE, Inc. July-December 2011 Page 13 India Retail INDIA OFFICES India Retail New Delhi CBRE South Asia Pvt. Ltd., Ground Floor, PTI Building 4, Parliament Street, New Delhi 110 001 T (91 11) 4249 0200 / 4239 0200 F (91 11) 2331 7670 Gurgaon CBRE South Asia Pvt. Ltd., 19th Floor, DLF Square, M Block, Jacaranda Marg, DLF City Phase II, Gurgaon 122002 T (91 124) 4659700 F (91 124) 4659800 Mumbai CBRE South Asia Pvt. Ltd., #202/203, 2nd Floor, Naman Centre, G-block, Bandra-Kurla Complex, Bandra (E), Mumbai – 400 051 T (91 22) 40690100 F (91 22) 26527655 About CBRE Group, Inc. CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world's largest commercial real estate services firm (in terms of 2010 revenue). The Company has approximately 31,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our Web site at www.cbre.com. CBRE South Asia Pvt. Ltd. was the first independent international Real Estate consulting firm to set up office in the Indian sub continent. Over the last 16 years, the Indian operations have grown to a network of offices in all the major metropolitan cities. Today with over 2300 professionals, CBRE South Asia Pvt. Ltd. is one of the leading Real Estate consultants in the Indian subcontinent. Please visit our website at www.cbre.co.in. Chennai CBRE South Asia Pvt. Ltd., 2C&D, Gee Gee Emerald 151, Village Road,Nungambakkam Chennai 600 034 T (91 44) 2821 4599 / 4571 / 4619 F (91 44) 2821 4607 Bangalore CBRE South Asia Pvt. Ltd., Hulkul Brigade Centre Ground Floor, No. 82 Lavelle Road, Bangalore 560 001 T (91 80) 40740000 F (91 80 ) 411 21239 Hyderabad CBRE South Asia Pvt. Ltd., 211, Maximus 2B, Mindspace Cyberabad, Survey No. : 64 (Part), APIIC Software Layout, Madhapur, Hyderabad - 500 081 T (91 40) 40335000 F (91 40) 40335050 Pune CBRE South Asia Pvt. Ltd., 704/705/706, 7th Floor Nucleus Church Road Pune - 411001 T (91 120) 26055437/367/397/40190100 F (91 120) 26055405 July-December 2011 We obtained the information above from sources we believe to be reliable. However, we have not verified its accuracy and make no guarantee, warranty or representation about it. It is submitted subject to the possibility of errors, omissions, change of price, rental or other conditions, prior sale, lease or financing, or withdrawal without notice. We include projections, opinions, assumptions or estimates for example only, and they may not represent current or future performance of the property. You and your tax and legal advisors should conduct your own investigation of the property and transaction. Kolkata CBRE South Asia Pvt. Ltd., Jindal Towers 2nd, Floor, Block B 21/1A/3 Darga Road Kolkata - 700017 T (91 33) 40190200 F (91 33) 40190230 Page 14 © 2011, CBRE, Inc.