India Office Property Market Overview Q1 2017

Transcription

1 India Office Property Market Overview Q1 217

2 Colliers Quarterly INDIA OFFICE 13 April 217 Office demand to remain firm Surabhi Arora Senior Associate Director India Notwithstanding the demonetisation of high-value currency notes in November 216, the economy recovered faster than expected and early projections suggest a growth of 7.1% in the fiscal year ending March 217. All the key economic indicators suggest that India s consumption based recovery is on track, and the economy is benefiting from an upswing in demand and output. Although five months on from demonetisation occupiers' markets across India's major cities have seen no discernible adverse impact, we expect demand to firm up driven by the strengthening economy. Forecast at a glance Demand Tenants' appetite is likely to remain focused on Grade A developments; relocation and consolidation should remain primary drivers of demand Supply New supply is unlikely to meet demand in the technology-driven cities; precommitments should remain high Vacancy rate Vacancy rates ought to stay low (7-9%) in cities such as Bengaluru, Hyderabad, Chennai and Pune Rent Prime rents likely to see an average annual growth of 5% in 217 across India's tech-driven cities Price Set to remain stable as retail investors remained cautious following demonetisation Positive outlook on account of improving economy Gross office take-up in India amounted to 9.3 million sq ft (863,998 sq m) in Q The market also recorded about 2.5 million sq ft (232,258 sq m) of precommitments signifying healthy demand. Although Q1 leasing volume represents a 25% decline q-o-q, volume is up by 8% y-o-y. The technology sector continued to generate demand for office space across cities, representing 51% of the total take-up in Q1 217, followed by engineering and manufacturing on 11% and banking, financial services and insurance on 9%. The Bengaluru (Bangalore) market maintained its top position across nine cities despite low vacancy and recorded an overwhelming share of 37% of total absorption. Mumbai and Delhi NCR 1 followed with shares of 18% and 17% respectively in total absorption. Chennai, Pune, Hyderabad and Kolkata accounted for 11%, 9%, 6% and 2% respectively in the overall leasing volume. We expect demand to remain firm in 217, driven by technology and banking, financial services and insurance companies (BFSI). In Q1 217, the Nikkei/IHS Markit Services' Purchasing Managers' Index rose to 51.5 in the month of March, its highest level since October 216 indicating expansion. Oxford Economics also suggests that India s composite PMI surged ahead, boosted by growth in output and new orders indicating a positive outlook. However, increased demand for high skilled work such as automation, Internet of Things (IoT), big data and analytics instead of process based work may lead to a short-term skill gap and disrupt expansion plan of technology companies in the next 2-3 years. Supply of Grade A central office space will be replenished throughout the next 12 months but is unlikely to meet the demand in cities such as Bengaluru, Hyderabad, Chennai and Pune. Thus, we expect upward pressure on prime rents to continue and expect a 5% increase in coming quarters across these cities. The rental outlook remains broadly stable in cities such as Delhi NCR, Mumbai and Kolkata; however; we expect prime buildings to continue to command a premium over average market rents due to tenants' appetite for Grade A developments. Note: 1 Delhi NCR includes Delhi, Gurgaon and Noida

3 Contents Executive Summary India Office demand to remain firm... 2 Mumbai Leasing acitivity to revive in Q Delhi Steady decline in rents to continue... 7 Gurugram (Gurgaon) Average rents to remain stable... 1 NOIDA Low rents likely to support demand Bengaluru Rental uptrend to prevail in Chennai Upcoming SEZ supply likely to drive demand Hyderabad Office rents likley to surge in Pune Upward pressure on rents to continue Kolkata Tenant favourable conditions to persist in Q [Type here]

4 Colliers Quarterly MUMBAI OFFICE 13 April 217 Leasing activity to revive in Q2 217 Uttara Nilawar Manager Mumbai Traditionally dominated by the banking and financial services sector, the Mumbai commercial market experienced diverse new leasing activity in Q1 217 with demand driven primarily by companies in the logistics, media, advertising, fast-moving consumer goods (FMCG) sectors and law firms. With several big transactions currently in play, we expect a significant increase in leasing by these companies in the upcoming quarters. We expect Grade A supply to remain a concern in the city and suggest that occupiers consider optimising their workplace efficiency. Forecast at a glance Demand Demand is likely to follow supply with preference for Grade A stock; shared space should gain momentum due to dearth of quality grade A stock Supply New supply will mostly be in the form of small floor plates across most Mumbai micromarkets Vacancy rate Vacancy levels should remain stable in most locations except Andheri and Navi Mumbai due to the strong supply pipeline Rent A stable rent scenario should prevail in Mumbai. We expect a 3-4% rise in secondary business districts Price Capital values likely to remain stable in the short term Relocation transactions dominate the office leasing market In Q1 217, relocation transactions outnumbered expansions and new entrants, thereby dominating the office leasing market in Mumbai. With absorption of 1.7 million sq ft (157,935 sq m), the leasing market remained subdued in Q1 217 recording a 1% decline q-o-q. Although leasing remained subdued, increased interest from investors is evident in the commercial property market. We observed a few outright purchases in Q According to market sources, the pharma major, Zydus Healthcare has bought 8, sq ft (7,432 sq m) of office space in Goregaon East at INR1.72 billion (USD.3 billion). ICICI Prudential Life Insurance Co. Ltd has also recently bought one floor covering 35, sq ft (3,252 sq m) in the Crescenzo building at Bandra Kurla Complex (BKC). Netmagic, a major player in the data centre market has supposedly entered into an agreement with Hiranandani and Balaji Groups to purchase a commercial building in Chandivali (Powai) for INR3.21 billion (USD.5 billion). We foresee that investor interest will remain elevated for Grade A non-strata sale buildings in the city. Rental Values Micromarkets Rental Values 1 q-o-q y-o-y CBD % % Andheri East 9-13 % % BKC % % Lower Parel % % Malad 8-1 % % Navi Mumbai 7-1 % % Powai % % Worli/Prabhadevi % % Goregaon/JVLR % % Kalina % 6% Thane 7-9 % 12% LBS % % Source Colliers International India Research 1 Indicative Grade A rentals in INR per sq ft per month 2 Nariman Point, Ballard Estate and Fort 3 Lal Bahadur Shastri Marg

5 Although banking and financial services usually account for a big share in Mumbai leasing, a major shift in leasing concentration was observed in Q Companies in logistics, media, advertising, FMCG and law firms accounted for a 35% share in total leasing volume, while other demand drivers like engineering & manufacturing, technology firms, banking and financial services (BFSI) along with healthcare & pharmaceuticals recorded a 2%, 19%, 18% and 5% share respectively of the overall leasing volume. Consulting formed only a 3% share; we are expecting several large deals to conclude in the upcoming quarters by global consulting giants, which should revive the absorption numbers. In Q1 217, the average deal size was in the range of 16,-18, sq ft (1,486-1,672 sq m), a 3% decline since Q The Western suburbs recorded a 37% share in leasing volume with occupiers' preference concentrated in Andheri and Goregaon. Owing to the available Grade A stock, Central suburbs and Navi Mumbai recorded a 27% and 15% share of leasing; while other micromarkets like Central Mumbai, Thane, BKC and CBD accounted for 21% share in absorption. In our opinion, demand will follow supply; hence occupiers' preference should remain concentrated in the western suburbs, central suburbs and Navi Mumbai. With premium completions in Q1 217 such as Empressa, ATL Corporate Park and Crescent Business Square totalling to.4 million sq ft of new office stock (37,161sq m), Andheri micromarket in the western suburbs should continue to outperform. Gross Office Absorption in million sq ft Q1 Q2 Q3 Q4 New supply addition to increase vacancy in Andheri and Navi Mumbai While the supply pipeline dried up in Thane, Powai and CBD with vacancy levels averaging 4-5%; markets such as Andheri and Navi Mumbai experienced a vacancy rate of 2%. With major developments such as Kanakia Wall Street, Times Square Tower D, Skyline Icon Corporate Park and Platinum, Andheri should witness supply addition of about 3 million sq ft (278,79 sq m) in the next two years. Navi Mumbai should also be a frontrunner in quality Grade A supply infusion with almost 6 million sq ft (557,418 sq m) of new supply by 22. The upcoming supply pipeline in both these micromarkets should put further upward pressure on vacancy levels in coming quarters. On the other hand, markets like Thane, Powai, CBD and LBS should be challenged by significant supply constraints as no major development is scheduled for completion in these micromarkets. Rental & Capital Value Trend (INR) Q1 21 Q1 211 Q1 212 Q1 213 Q1 214 Q1 215 Rental Values Note. The above graph represents average Grade A rents in INR per sq ft per month and average capital values on an INR per sq ft basis Rental values to remain stable Rental values were unchanged since Q4 216 owing to a steady supply and demand in most micromarkets. The stable rent scenario is likely to continue in the future as well since occupiers are looking to optimise costs and expand to locations with available quality stock. As there is a dearth of Grade A contiguous large floor plates across Mumbai, select buildings should continue to demand a premium over market average rent depending on demand supply dynamics at the micromarket level. Although there were a few outright purchases in the city in Q1 217, we expect capital values to remain stable in the short term. Q1 216 Q1 217 Q1 218F Q1 219F Q1 22F Capital Values 5 Colliers Quarterly 13 April 217 mumbai office Colliers International

6 Colliers View We expect a significant increase in transaction volumes in coming quarters owing to a number of market transactions currently in play. Demand is likely to be led by logistics and pharmaceutical companies, consulting firms and serviced offices. Back office operations of a few banking and financial companies moved to Navi Mumbai in Q4 216 and Q We expect this number to increase in coming quarters as occupiers may continue to relocate at affordable locations in Navi Mumbai. Rental and capital values are set to remain stable as the tenant demand of smaller plate sizes should be met by most micromarkets for the next few months. Recently, City and Industrial Development Corporation (CIDCO) awarded the first phase of the Navi Mumbai airport to the GVK Group. In addition, work on Metro II A & B and Metro III is in full swing. These projects should improve connectivity in Mumbai significantly, thereby affecting the office market positively. The revised Mumbai Development Plan (DP) although delayed due to several corrections and alterations, is likely to be finalised soon. Builders keenly await the same to get clarity on the Development Control Rules (DCR) to be followed for ongoing and planned projects. MAJOR TRANSACTIONS IN Q1 217 CLIENT BUILDING NAME AREA (SQ FT) LOCATION LEASE/SALE General Mills Venture 1,85, Powai Lease Tata Consulting Engineers (TCE) Empire Tower 9, Navi Mumbai Lease FCBUlka Chibber House 8, Andheri Lease Bisleri Bisleri Compound 8, Andheri Lease FIS Global Fairmount 8, Powai Lease KEY UNDER CONSTRUCTION PROJECTS BUILDING NAME DEVELOPER AREA (SQ FT) LOCATION POSSESSION Codename Smash Hit Neptune Developer 1,4, Bhandup 217 Wall Street Kanakia 78, Andheri 217 Notes: 1. Office Market: The major business locations in Mumbai are the CBD (Nariman Point, Fort and Ballard Estate), Central Mumbai (Worli, Lower Parel and Parel), Bandra Kurla Complex (BKC) and Andheri Kurla stretch. Powai, Malad and Vashi are the preferred IT-ITES destinations, while Airoli at Navi Mumbai and Lal Bahadur Shastri Marg are emerging as new office and IT-ITeS submakets. 2. Rents/Capital Value: Market average of indicative asking price for Grade A office space. 3. Available Supply: Total Grade A office space being marketed for sale or lease in surveyed quarter. 4. All the figures are based on market information as on 25th March 217 For more information: Surabhi Arora Senior Associate Director Research Tel: Surabhi.arora@colliers.com Nishith Agarwal Senior Associate Director Office Services Nishith.agarwal@colliers.com Ravi Ahuja Executive Director Office Services Ravi.ahuja@colliers.com 17th Floor, Indiabulls Finance Center, Tower 3, Elphinstone (W), Mumbai India Copyright 217 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. 3 Colliers Quarterly 13 April 217 mumbai office Colliers International

7 Colliers Quarterly DELHI OFFICE 13 April 217 Steady decline in rents to continue Parul Bhargava Senior Analyst Delhi We expect leasing volume to remain stable in 217 as relocation activities of tenants are likely to be offset by constant demand from the tenants who work in close collaboration with government offices and embassies located in the Lutyens Zone. We foresee a further decline of rents in Grade B buildings due to tenants' preference for quality buildings. With the vacancy in the Central Business District (CBD) rising, we expect more property owners to enter into strategic alliance with coworking operators. We suggest that occupiers looking to set up small offices in the CBD should consider the coworking spaces that have sprung up in this area in order to enjoy Grade A amenities. Forecast at a glance Demand Demand for office space Grade A office buildings likely to remain stable in 217 Supply Limited supply in the pipeline; only about.36 million sq ft (33,445 sq m) of Grade A space is likely to be added to the city inventory by Q4 217 Vacancy rate Vacancy likely to go up in Grade B developments; Premium Grade A stock should see stable vacancy Rent We expect a correction in rents for older buildings resulting in average rents registering a dip of 3-5% y-o-y Coworking space operators to expand their footprint Corporate leasing activity remained relatively subdued in Q1 217 with the gross absorption standing at only about.33 million sq ft (3,658 sq m), down by 15% q-o-q. We attribute the decline in leasing to the decrease in average deal size which stood at 18,55 sq ft (1718 sq m) in Q1 217 as compared to 21,2 sq ft (1969 sq m) reported in FY 216. The Engineering and Technology sectors kept the market alive by contributing 34% and 26% share of overall leasing volume respectively. Contrary to our expectation, demand from Banking, Financial services and Insurance (BFSI) and the manufacturing sector remained subdued, together contributing only 14% of total leasing volume Tenant appetite remained higher for premium developments. The emerging commercial hub Aerocity continued to attract tenants due to greater availability of Grade A quality buildings and affordable rents compared to other micromarkets in Delhi. We expect Aerocity to continue to attract tenants looking to expand. However, the supply pipeline is likely to remain narrow due to height restrictions in this area, resulting in further upward pressure on rents. Rental Values Micromarkets Connaught Place (CBD) Rental Values 1 q-o-q y-o-y % -19% Nehru Place % -16% Saket % -6% Jasola % -14% Netaji Subhash Place % -18% Okhla % -12% Aero City % 3% 1 Indicative Grade A rentals in INR per sq ft per month Price Capital values are likely to remain stable due to lack of investment sales activity

8 Coworking space/shared workspace and business centre providers continued to expand their footprint in several key micro markets absorbing smaller vacant offices. The preferred market for coworking players remained the CBD despite high rents due to well-placed social infrastructure and location advantages. We expect this trend to continue as the increase in vacancy level in Grade B buildings may push developers to consider converting them into coworking spaces Gross Office Absorption in million sq ft Ft Sq. In Million Q1 Q2 Q3 Q4 New supply in CBD witnesses deferment to the end of year On a q-o-q basis, the total vacant stock in Delhi declined by about 1.8% and now stands at 1.4 million sq ft (13,64 sq m). Limited contiguous space options in Grade A buildings also led occupiers to opt for options in Gurugram and Noida. No new supply was added to the stock in Q1 217 as the buildings scheduled for completion in this quarter were deferred to the end of the year. We predict.36 million sq ft (33,445 sq m) of Grade A supply infusion in the CBD zone in the next nine months. Major projects scheduled for completion in CBD area are Parsvanath One on KG Marg and Skipper House on Barakhamba Road with a total built-up area of.25 million sq ft (23,225 sq m). A small building with built up area admeasuring.65 million sq ft (6,38 sq m) on Plot No. 2 and 3 on Tolstoy Lane in CBD will likely see completion by the end of the year. A government project for Unique Identification Authority is also scheduled to be completed by end-217 in the CBD area. by Pratham Developers with about 1.2 million sq ft (111,483 sq m) of developable area, is also scheduled to be completed by 219. However, this will be primarily a retail development with a small commercial office component. Decline in rents on the cards across micromarkets barring Grade A developments Occupiers' relocations to satellite towns of Delhi and subdued leasing volumes have weighed on rents in CBD and Off-CBD locations. Most of the micromarkets have witnessed a 3-6% q-o-q decline in rental values except Aerocity. This micromarket witnessed a 5% q-o-q uptick as the prime new completions such as Bharti Worldmark continued to command a premium pushing the average rents upwards. We expect that the rents may decline by a further 3-5% in the coming quarters due to muted demand in most of the market except Aerocity. As noted, we believe affordable rents in Aerocity as compared to other micro markets in Delhi should continue to attract tenants; however, the supply pipeline is likely to remain narrow due to height restrictions in this area, resulting in further upward pressure on rents. We suggest property owners of Grade B developments should remain flexible on rent negotiation to check tenant outflow. Rental and Capital Value Trend (INR) Q1 28 Q1 29 Q1 21 Q1 211 Q1 212 Q1 213 Q1 214 Rental Values Note. The above graph represents average Grade A rents per sq ft per month and average capital values on a per sq ft basis Q1 215 Q1 216 Q1 217 Q1 218F Q1 219F Capital Values Q1 22F In addition, a couple of mixed-use developments are in the planning stage. Bharti Worldmark Phase 2 is in the planning stage in Delhi Aerocity; this will have retail and office facilities. Another mixed-use development, 'Vegas' 8 Colliers Quarterly 13 April 217 DELHI OFFICE Colliers International

9 Colliers View In line with our forecast, rents in CBD and Nehru Place have witnessed a decline of about 5-6% due to occupiers' flight to peripheral satellite cities such as NOIDA and Gurugram (Gurgaon) continued. We foresee that a further rent correction in Grade B developments will stimulate landlords to enter into strategic alliances with coworking operators in this area. For coworking operators, the CBD will remain a preferred location due to excellent metro connectivity and the fact that social infrastructure is in place. With vacancy in the CBD rising, we expect more property owners to enter into strategic alliances with coworking operators in this area. MAJOR TRANSACTIONS IN Q1 217 CLIENT BUILDING NAME AREA (SQ FT) LOCATION LEASE/SALE WHO Redfort Capital Towers 52, CBD Lease Azure Power Bharti Worldmark 45, Aerocity Lease Chegg India Baani Corporate One 32, Jasola Lease Facebook Redfort Capital 24, CBD Lease NEC Splendor Forum 21, Jasola Lease KEY UNDER CONSTRUCTION PROJECTS BUILDING NAME DEVELOPER AREA (SQ FT) LOCATION Parasvnath One Parasvnath Developers 15, KG Marg 217 Skipper House Govt. Trust 1, Barakhama Road 217 POSSESSION Notes: 1. Office Market: The commercial areas in New Delhi can be broadly classified into CBD (Connaught Place), SBD Nehru Place, Bhikaji Cama Place, Netaji Subhash Place, Jasola and Saket. 2. Rents/Capital Value: Market average of indicative asking price for sq A office space. 3. Available Supply: Total Grade A office space being marketed for sale or lease in surveyed quarter. 4. All the figures in the report is based on market information as on 25th March 217. For more information: Surabhi Arora Senior Associate Director Research Tel: Surabhi.arora@colliers.com Vaibhav Mahurkar Director Office Services Vaibhav.mahurkar@colliers.com Statesman House, 4th Floor Barakhamba Road Connaught Place New Delhi India Copyright 217 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. 3 Colliers Quarterly 13 April 217 DELHI OFFICE Colliers International

10 Colliers Quarterly GURUGRAM (GURGAON) OFFICE 13 April 217 Average rents to remain stable Surabhi Arora Senior Associate Director Gurgaon We expect demand to strengthen in coming quarters driven mainly by technology and banking, financial services and insurance (BFSI) firms. Amid high rents and low vacancy, occupiers based in preferred locations such as Cyber City and Golf Course Road are evaluating whether to renew their existing leases or to relocate to inexpensive locations such as Golf Course Extension Road and along the NH8. Significant new supply over 217 should keep rents in check in prime locations, while high-vacancy markets such as Golf Course Extension Road may see downward pressure on rents. Forecast at a glance Demand Likely to strengthen in the coming quarters driven mainly by technology majors and financial services firms Supply About 2.4 million sq ft (222,967 sq m) is scheduled for completion in 217 but we expect it to get deferred to 218 Vacancy rate Overall vacancy levels may inch up on Golf Course Extension Road if new supply is added to the total stock Rent Average rents are likely to remain stable given high new supply; Golf Course Extension Road may see a correction in the range of 2% to 5% Price We expect capital values to remain largely stagnant; owing to recent demonetisation, retail investors are likely to stay away from strata-tilted buildings Demand from technology sector bounces back During Q1 217, office sector demand in Gurgaon remained in line with the prior-quarter numbers. The gross leasing volume reached about.84 million sq ft (78,38 sq m), down by 11% compared to Q We also recorded.75 million sq ft (72, sq m) of precommitments in the under-construction buildings, indicating healthy demand in the Gurgaon market. Demand from Information Technology and Information technology enabled services (IT-ITeS) revived in Q1, 217 and the sector shared 53% of overall leasing volume in Q1 217 versus 32% in FY 216. Apart from this, the Banking, Financial services and Insurance (BFSI) sector, coupled with engineering and consulting firms looking to expand or enter the market, leased smaller office spaces that formed the bulk of transactions. In Q1 217, DLF Limited has confirmed the sale of a 4% stake in DLF Cyber City Developers Ltd. to GIC Pte. Ltd. The sale is likely to fetch about INR 14 billion (USD 2.18 billion) for DLF, which may use the funds to reduce debt. We expect institutional investors to remain bullish on acquisition of grade A leased assets. However, the lack of quality non-strata-titled buildings will probably keep investment low in the sector. Rental Values Micromarkets Rental Values 1 q-o-q y-o-y MG Road % -8% Golf Course Road % 2% Institutional Sectors (Sector 44, 32 and 18) Golf Course Extension / Sohna Road 6-9 % % % -4% National Highway % % Udyog Vihar and Industrial Sectors 3-45 % % Manesar % % DLF Cyber City (IT) % 7% 1 Indicative Grade A rentals in INR per sq ft per month

11 Udyog Vihar and Sohna Road remained the most popular micromarkets, representing 36% and 15% respectively of total office absorption. The popularity of these areas indicates an increased inclination towards cost effectiveness among corporate occupiers. Cybercity and MG Road constitute about 8% and 5% of overall demand. We expect the share of centralised locations to reduce further in coming quarters as a few companies whose leases are expiring are looking to relocate to other alternative locations due to limited choice of premises and high rents. Due to metro connectivity, Golf Course Road and Extension Road should attract occupiers' interest, while traditional micromarkets such as Udyog Vihar and NH8 should continue to gain traction due to locational advantages and affordable rents. Gross Office Absorption in million sq ft F Q1 Q2 Q3 Q4 New supply to remain concentrated on Golf Course Extension Road During Q1 217, 1.1 million sq ft (12,193 sq m) of new supply was released into the market, mainly on Southern Peripheral Road and Golf Course Extension Road. Major completions included Enovation Centre in Sector 75, which added over.55 million sq ft (51,96 sq m), and GoodEarth Business Bay in Sector 58, which contributed another.35 million sq ft (32,516 sq m). In addition, two smaller buildings, Novus Tower in Sector 18 and Reach Commercial in Sector 71, added.42 million sq ft (39,19 sq m) to the total stock. Significant supply is scheduled for completion in coming quarters, mainly in the Golf Course Extension Road and NH-8 micromarkets. Special Economic Zone (SEZ) supply equating to 1.2 million sq ft (111,483 sq m) is due to be delivered by the end of 217 on Golf Course Extension Road. This new supply is likely to draw the attention of large IT occupiers due to low vacancy in other SEZs. Vacant stock amounting to 8.7 million sq ft (88,256 sq m) was available for lease in Q1 217, recording a 3% drop q-o-q. Udyog Vihar and Golf Course Extension Road had the maximum concentration of available stock, at 3% and 18% respectively. High rents likely to push occupiers to emerging corridors Due to enhanced competition from emerging corridors, landlords in centralised locations have become cautious in their rental expectations. In Q1 217, MG Road witnessed a decline of 4% in average rental values. Golf Course Road has also seen a decrease of 2% as property owners remained flexible in negotiation. We expect rents to remain stable in most of the micromarkets. However, Golf Course Extension Road may see a correction in the range of 2% to 5% since given significant new supply property owners may remain soft on lease negotiations in order to kick-start leasing in new buildings. Rental and Capital Value Trend (INR) Q1 28 Q1 29 Q1 21 Q1 211 Q1 212 Q1 213 Q1 214 Rental Values Note. The above graph represents average Grade A rents per sq ft per month and average capital values on a per sq ft basis In a boost to infrastructure, the Rapid Metro line and two underpasses became operational on Golf Course Road in Q The Rapid Metro connects Delhi and Noida through an interchange station at Sikandarpur, (Gurugram). Moreover, the travel time from the airport and other parts of the cities on this road has improved significantly due to the start of two underpasses. In our opinion, the infrastructure improvement on Golf Course Road will positively affect the Golf Course Extension Road as well, and will draw occupiers' attention to this emerging micromarket. Q1 215 Q1 216 Q1 217 Q1 218F Q1 219F Capital Values Q1 22F 11 Colliers Quarterly 13 April 217 GURUGRAM (GURGAON) OFFICE Colliers International

12 Colliers View We expect demand to remain strong in the coming quarters backed by Technology and BFSI firms. We expect vacancy to inch upwards considering that significant supply is scheduled for completion in the next three quarters. Overall rents are likely to remain stable while high-vacancy micro markets such as Golf Course Extension road may see a decline in the range of 2% to 5% as property owners are likely to remain flexible in negotiations in order to kick-start leasing in newly completed buildings. Tenants looking for large floorplates in affordable rents are likely to evaluate options in second-generation buildings in the Udyog Vihar and Institutional sectors due to high rents in preferred micromarkets such as Cybercity and Golf Course Road. In our opinion, occupiers may also look to Golf Course Extension Road for their future expansion requirement as the recent completion of rapid metro corridor has improved the connectivity of this location significantly. MAJOR TRANSACTIONS IN Q1 217 CLIENT BUILDING NAME AREA (SQ FT) LOCATION LEASE/SALE Pay U Bestech Business Tower 6, Sohna Road Lease EXL DLF Building No. 14 4, Cyber City Lease Regus Spaces DLF Building No. 9A 26, Cyber City Lease Japan International Corporation for Transportation AIPL Masterpiece 25, Golf Course Road Lease Facebook Horizon Centre 2, Golf Course Road Lease KEY UNDER CONSTRUCTION PROJECTS BUILDING NAME DEVELOPER AREA (SQ FT) LOCATION POSSESSION IREO City Phase 1 IREO 75, Golf Course Extension 217 GYS Vision Tower B&C GYS 8, Golf Course Extension` 217 Notes: 1. Office Market: The prime business locations in Gurgaon are MG Road, Golf Course Road, Cyber City and Udyog Vihar. Manesar on the outskirts of Gurgaon is also emerging as the city's new office destination. 2. Rents/Capital Value: Market average of indicative asking price for Grade A office space. 3. Available Supply: Total Grade A office space being marketed for sale or lease in surveyed quarter. 4. All figures in the report are based on market information as on 25th March 217. For more information: Surabhi Arora Senior Associate Director Research Tel: Surabhi.arora@colliers.com Vaibhav Mahurkar Swapan Dutta Director Office Senior Services Associate Director vaibhav.mahurkar@colliers.com Office Services Swapan.dutta@colliers.com Prashant Garg Senior Associate Director Office Services prashant.garg@colliers.com PS 1st Srijan Floor, Corporate Technopolis Park, 14th Building, Floor, Golf GP-2, Course Block Road, EP & Sector GP, Salt 54 Lake Sector V, Kolkata Gurgaon India India Copyright 217 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. 3 Colliers Quarterly 13 April 217 GURUGRAM (GURGAON) OFFICE Colliers International

13 Colliers Quarterly NOIDA OFFICE 13 April 217 Low rents likely to support demand Parul Bhargava Senior Analyst NOIDA The technology sector and manufacturing should continue to be the leading demand drivers. We expect transaction volume to remain healthy underpinned by demand mainly from research, development, and back end support divisions of technology companies and occupiers looking to relocate from older buildings in Delhi. We may also see a spill-over of demand to NOIDA due to rising rents and low vacancy in southern Indian cities. We expect rents to remain stable despite high vacancy. Forecast at a glance Demand We expect absorption to remain healthy along NOIDA Expressway due to the availability of large floor plates at affordable rents Supply Around 2.2 million sq ft (24,46 sq m) supply is scheduled for completion in 217; we anticipate deferment of completion dates due to vacancy Vacancy rate We expect city wise vacancy level to remain stable at 43-45% in the short to medium term Rent Rents are likely to remain stable in the short term as occupiers remain in a strong negotiating position amid huge supply scheduled for completion. Price Capital values are likely to remain stable in the short term due to lacklustre demand from retail investors after the demonetisation move NOIDA Expressway likely to remain preferred choice of tenants Leasing momentum in NOIDA in Q1 217 remained relatively subdued with overall transaction volume reaching.4 million sq ft (37,161 sq m), down by 11% on a q-o-q basis. Technology firms continued to be the leading driver of demand and contributed around 36% of the overall transaction volume in Q Co working and Business Centre operators expanded their footprint in the city and constituted 15% of the demand followed by Media companies and Engineering firms which contributed 13% each. BFSI and manufacturing firms catered to the rest of the demand. Expressway continued to dominate the gross leasing with nearly 7% share of total office sector demand in Q The leasing activity in institutional sectors such as Sector 62 and nearby industrial sectors (57 to 6 and 63 to 65) was adversely impacted by traffic congestion due to ongoing metro rail construction in Q However, in our opinion, the leasing demand should revive by the end of the year as once the metro is operational; the connectivity of this area is likely to improve significantly. Rental Values Micromarkets Commercial Sectors 2 Institutional Sectors (Non IT) 3 Institutional Sectors (IT) 3 Rental Values 1 q-o-q y-o-y 7-11 % % 8-1 % % 4-6 % -5% Industrial Sector (IT) % -6% Source Colliers International India Research 1 Indicative Grade A rentals in INR per sq ft per month 2 Sector 18 (hotels, shopping centres, banks, cinemas) 3 Sector 16 A,62, 125,126,127,132,135,136,142,143,144,153,154 (Educational & healthcare facilities, Information technology services & Government offices) 4 Sector 1-9,57-6, (factories, warehouses and IT services)

14 In Q1 217 a few shared office operators such as Awfis and Vatika also expanded their footprint in NOIDA by taking 3, sq ft (2,787 sq m) and 26, sq ft (2,415 sq m) on NOIDA expressway to cater to the demand from SMEs (small and medium-sized enterprises) and start-up companies. In Q1 217, the real estate developer Supertech tied up with the coworking company Scootr to develop a 3, sq ft (2,787 sq m) coworking space centre in its Supernova project in Sector 94. In our opinion, the market may see more such strategic alliances between the shared office operators and developers in the coming quarters. The affordable rents, excellent metro connectivity and availability of office space are likely to attract more coworking operators to the city. Gross Office Absorption in million sq ft Ft Sq. In Million F Q1 Q2 Q3 Q4 Vacancy likely to surge amid significant supply scheduled for completion in 217 The lack of strata sales in projects under construction after the currency demonetisation by the government has weighed on market sentiment. Amid high vacancy, developers have deferred the completion of projects under construction and refrained from launching new projects. Although around 2.2 million sq ft (24,46 sq m) of new supply is scheduled for completion by Q4 217, we expect most of the supply will be deferred to next year, as developers are likely to remain cautious in adding more new speculative supply amid high vacancy. Major buildings scheduled for completion in 217 include Wave One in Sector 18 with an area of over 1. million sq ft (92,93 sq m), Brookfield Tower.35 million sq ft/ 32,516 sq m and KLJ NOIDA One Tower B (.2 million sq ft/ 18,587 sq m) and I Thum Tower B (.65 million sq ft/ 6,387 sq m). Overall rents to remain stable amid high supply pipeline In Q1 217, rents remained stable across all NOIDA's micromarkets. Overall rents are likely to remain stable despite high vacancy levels as the average rents are already low especially in Grade B developments. Despite high vacancy levels, tenants looking for higher quality and well-maintained building may find their options limited in NOIDA. Thus, in our opinion, Grade A buildings will continue to command a premium over market average rents; while any increase in rents is unlikely. Rental and Capital Value Trend (INR) Q1 29 Q1 21 Q1 211 Q1 212 Q1 213 Q1 214 Rental Values Note: The above graph represents average Grade A rents per sq ft per month and average capital values on per sq ft basis Phase 3 of the Delhi Metro which will connect Botanical Garden-Kalindi Kunj to Jankpuri West is expected to become operational by Q The upcoming metro matrix should significantly reduce the travel time for commuters travelling from NOIDA to Delhi Airport and Gurugram (Gurgaon) and Delhi. The improved connectivity with Delhi airport should give a significant boost to the office sector in the coming quarters. Q1 215 In addition, an underpass is being constructed along the Mahamaya Flyover-Kalindi Kunj route to connect Sectors 94, 95 and125 with the Master Plan III road. This project aims to decongest the Mahamaya Flyover linking Delhi with NOIDA. Q1 216 Q1 217 Q1 218F Q1 219F Capital Values Q1 22F 14 Colliers Quarterly 13 April 217 NOIDA Sector Colliers International

15 Colliers View We expect leasing to remain concentrated on NOIDA Expressway, as relocations from older buildings in Jasola and Okhla are likely to push tenants to evaluate options in this micromarket. On account of their affordable rents, Industrial Sectors in NOIDA should continue to witness demand from the manufacturing sector and domestic technology companies while media companies will remain concentrated in Sector 16A. In line with our earlier forecast, we expect rents to remain stable in most of the micromarkets in coming quarters. Increasing supply-side competition should keep the office sector tilted in favour of occupiers. MAJOR TRANSACTIONS IN Q1 217 CLIENT BUILDING NAME AREA (SQ FT) LOCATION LEASE/SALE NTT Data Oxygen Business Park 1, NOIDA Expressway Lease Technip World Trade Tower 5, Sector 16 Lease Live Media Assotech Business Cresterra 5, NOIDA Expressway Lease Awfis Lotus Boulevard 3, NOIDA Expressway Lease JC Penny World Trade Tower 25, Sector 16 Lease KEY UNDER CONSTRUCTION PROJECTS BUILDING NAME DEVELOPER AREA (SQ FT) LOCATION POSSESSION Wave One Wave Infratech Pvt Ltd. 1,, Sector KLJ NOIDA One - Tower B KLJ Group 2, Sector Notes: 1. Office Market: Institutional sectors include Sec 16 A, 62, 125,126,127,132,135,136,142,143,144,153 and 154, Industrial Sectors include Sector 1-9, 57-6 and while Sector 18 is the most developed commercial sector. 2. Rents/Capital Value: Market average of indicative asking price for Grade A office space. 3. Available Supply: Total Grade A office space being marketed for sale or lease in surveyed quarter. 4. All the figures are based on market information as on 25th March 217 For more information: Surabhi Arora Senior Associate Director Research Tel: Surabhi.arora@colliers.com Vaibhav Mahurkar Director Office Services Vaibhav.Mahurkar@colliers.com Gopeshwar Srivastava Associate Director Office Services Gopeshwar.srivastava@colliers.com Suite no. 6, Ground Floor Quest Offices, Pvt. Ltd., Logix Techno Park, Plot No. 5, Sector 127 NOIDA India Copyright 217 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. 3 Colliers Quarterly 13 April 217 NOIDA Sector Colliers International

16 Colliers Quarterly BENGALURU OFFICE 13 April 217 Rental uptrend to prevail in 217 Divya Grover Senior Manager Bengaluru In Q1 217, occupiers mainly continued expansion in southern peripherals. Though we expect occupier demand to remain upbeat in these locations, the upcoming new supply is unlikely to meet the rising demand in coming quarters resulting in upward pressure on rents. Absorption of pre-committed spaces coupled with expected demand upsurge is likely to outpace the upcoming supply pipeline of 8.1 mn sq ft (757,16 sq m) by the year end. Forecast at a glance Demand Demand upswing expected with several occupiers targeting new spaces yet to become operational Supply Despite planned completions of 2.9 mn sq ft ( 276, sq m) in Q2, supply may lag behind due to projected demand and pre-commitments Vacancy rate Some micromarkets such as Outer Ring Road might witness 2-3% vacancy rates by year end Rent Overall rents across micromarkets should increase by 1% by year end Price Should increase marginally in few locations in southern quadrant due to lack of saleable options Robust leasing trend leads to a 33% annual increase in absorption In Q1 217, Bengaluru retained its top position in attracting overall occupier interest across nine key Indian cities. Driven by a handful of large transactions and numerous mid-sized space requirements (less than 1, sq ft), gross leasing volume was recorded at nearly 3.5 mn sq ft (326,9 sq m) with about 33% increase year on year (y-o-y). In line with our earlier projections, we expect leasing activity to be dominated by small and mid-sized transactions until Q3 217 as most of the large sized request for proposals (RFPs) are likely to see closure by Q3 217 on completion of a few upcoming projects. Outer Ring Road continued to account for a major share in the total leasing volume accounting for 59%, followed by SBD (13%). CBD (8%), EPIP Zone/Whitefield (7%), Bannerghatta Road (5%) and other micromarkets (8%) constituted the remainder share. We expect Outer Ring Road to remain the most preferred location in the coming quarters. Central and suburban micromarkets are also going to find occupiers' interest, reflecting the growth of start-ups focused on analytics and smaller IT companies which prefer to take spaces in inner city locations of CBD and SBD. Rental Values Micromarkets Rental Values 1 q-o-q y-o-y CBD 9-15 % 9% Outer Ring Road (Sarjapur -Marathahalli) Outer Ring Road (K.R. Puram - Hebbal) % 12% % 9% Bannerghatta Road % 3% Hosur Road 3-4 % 8% EPIP Zone/Whitefield % 13% Electronic City 3-38 % 6% 1 Indicative Grade A rentals in INR per sq ft per month

17 Information Technology and Information Technology Enabled Services (IT-ITeS) sector's share in the overall leasing volume remained at par with the previous quarter at 69% followed by flexible workspace operators (7%), healthcare (6%), media and telecom (4%) and other sectors (14%). Gross Office Absorption in million sq ft Q1 Q2 Q3 Q4 8.1 mn sq ft new supply scheduled for completion in 217 but unlikely to justify demand In Q1 217, total of 2. million sq ft (189,9 sq m) new space became operational in the city. While Outer Ring Road constitutes 87% of this new supply vacancy levels remained low as most of new supply was either precommitted or quickly taken by occupiers. Rest of the new supply was concentrated in Old Madras Road (1%) and North Bengaluru (3%). At a quarterly dip of 4%, this new supply infusion was not able to keep pace with continued leasing demand creating a severe space crunch in prime IT-ITeS hubs such as Outer Ring Road. We anticipate that around 8.1 mn sq ft (757,16 sq m) of new supply will be added to the total stock over the remaining three quarters of 217. Most of this new supply is concentrated on North Bengaluru and Outer Ring Road (Sarjapur-Marathahalli). However, looking at the consistent demand and high pre-commitment rates in the upcoming buildings, we expect vacancy to remain in the range of 2-3% on Outer Ring Road. Even some locations in secondary business district (SBD) such as Koramangala, Indira Nagar and Old Airport Road which have traditionally been start-up hubs may see a similar trend to prevail in short term. In our opinion, occupiers should act fast and firm up their real estate requirements to identify the right space suited for their needs if they plan to maintain operations in these prime IT corridors going forward. Rents likely to increase by 1% across micromarkets Grade A office rents in all micromarkets largely remained stable barring Outer Ring Road (Sarjapur-Marathahalli) that witnessed a 3% increase in rents quarter-on-quarter (q-o-q). Amid low vacancy of 2-4% and high occupier preference, rents are likely to increase by at least 1% across all the micromarkets by Q We expect the highest rental appreciation in Outer Ring Road followed by CBD and SBD as second generation spaces in these micromarkets are also attracting increasing interest from small and mid-sized occupiers. However, rents in North Bengaluru may stagnate in midterm as expected completion of two major IT Parks by the end of this year ought to keep rents in check in this micromarket. Rental and Capital Value Trend (INR) Q1 28 Q1 29 Q1 21 Q1 211 Q1 212 Q1 213 Rental Values Q Note. The above graph represents average Grade A rents per sq ft per month and average capital values on a per sq ft basis Q1 215 Q1 216 Q1 217 Q1 218F Q1 219F Capital Values Q1 22F 17 Colliers Quarterly 13 April 217 BENGALURU OFFICE Colliers International

18 Colliers View While keeping an eye on the global headwinds and challenges related to automation, the large IT multinationals are likely to continue expansion in southern peripherals. If so, this will put further pressure on vacancy in micromarkets such as Outer Ring Road (Sarjapur - Marathahalli). We predict low vacancy of 2-4% in the next quarter in this micromarket. By year-end, rents across all micromarkets should increase by 1%. Despite a supply pipeline of nearly 2.9 million sq ft (276, sq m) in Q2, new occupiers with large sized requirements may find it difficult to lock in long term leases if they don t act fast. Some developers have already started expediting completions and planning future projects to address the inadequate supply situation. We also expect flexible workspace operators to intensify concentration in CBD and SBD locations in the short-term. MAJOR TRANSACTIONS OF Q1 217 CLIENT BUILDING NAME AREA (SQ FT) LOCATION LEASE/SALE Microsoft Prestige Fern Galaxy 589, Outer Ring Road Lease Google Bagmane Constellation Business Park 24, Outer Ring Road Lease SanDisk Salarpuria Hallmark 12, Outer Ring Road Lease Ather IBC Knowledge Park 73, Bannerghatta Road Lease Lam Research India The Fairway Business Park 6, Intermediate Ring Road Lease KEY UNDER CONSTRUCTION PROJECTS BUILDING NAME DEVELOPER AREA (SQ FT) LOCATION POSSESSION Divyasree Techno Park Divyasree Developers 4,415, Whitefield 219 Embassy Tech Village Embassy Group 4,, Outer Ring Road 218 Prestige Technostar Prestige Group 1,5, Whitefield 218 Notes: 1. Office Market: The major business locations in Hyderabad are the CBD/Off CBD (M.G. Road, Millers Road, Vittal Mallaya Road etc.), the SBD (Bannerghatta Road and Outer Ring Road (ORR) and PBD (Hosur Road, EPIP Zone, Electronic City and Whitefield). 2. Rents/Capital Value: Market average of indicative asking price for Grade A office space. 3. Available Supply: Total Grade A office space being marketed for sale or lease in surveyed quarter. 4. All figures in the report are based on market information as on 25th March 217. For more information: Surabhi Arora For Senior more Associate information: Director Market Research Contact Name Title Tel: +91 Market Surabhi.arora@colliers.com name@colliers.com Goutam Chakraborty Senior Director Contributors: Market Contact Integrated Name Services Market Contact Name Title Market Goutam.chakraborty@colliers.com Title Market +1 name@colliers.com Market Contact Name Title Market Prestige Garnet Level 2 Unit Market No. 21/22, Contact Name 36 Title Ulsoor Market Road Bengaluru India Market Contact Name Title Market Copyright 217 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. 3 Colliers Quarterly 13 April 217 BENGALURU OFFICE Colliers International

19 Colliers Quarterly CHENNAI OFFICE 13 April 217 Upcoming SEZ supply likely to drive demand Karthiga Ravindran Analyst Chennai Due to limited availability of quality supply in preferred micromarkets, peripheral areas of the city are likely to grow in coming quarters. With significant new supply scheduled for completion along Pallavaram-Thoraipakkam Road by 22, we expect this corridor to become the next hotspot for Information Technology and Information Technology enabled Service (IT-ITeS) occupiers due to its proximity to Old Mahabalipuram Road (OMR)-Pre Toll area and Grand Southern Trunk (GST) Road. We recommend big occupiers looking for large floor plates in Special Economic Zones (SEZs) to consider Chennai to benefit from the upcoming SEZ supply in OMR-Post Toll micromarket. Forecast at a glance Demand Growth and consolidation in IT-ITeS and Banking, Financial Services and Insurance (BFSI) sectors should continue to drive demand Supply Approximately 2.3 million sq ft (213,7 sq m) Grade A new supply to see completion in Q2 217 primarily in OMR-Post Toll Road Vacancy rate We expect the overall vacancy rate of 13% in Q1 217, to drop by the year end if a similar absorption trend is continued Rent The average city rents to grow by 4-5 % in y-o-y basis; OMR Pre-Toll likely to see more rental pressure Price With not many transactions lined up, capital values to remain stable across the micromarkets throughout 217 OMR-Post Toll likely to see demand in new SEZ developments Gross absorption in Q1 217 amounted to about 1 million sq ft (92,9 sq m). Although Q1 217 numbers represent a 57% drop on a q-o-q basis, we expect the demand for office space to remain healthy as about 1.2 million sq ft (111,5 sq m) of pre-committed space has been recorded in the upcoming SEZs in the OMR-Post Toll district. The OMR-Pre Toll areas and Central Business District (CBD) benefited from maximum occupier attention, accounting for 26% and 23% of total demand in Q1 217, respectively. The demand in OMR-Pre Toll areas was primarily driven by the sustained expansion of existing IT-ITeS occupiers. The CBD remained the preference of existing occupiers looking to grow and consolidate their operations within the same micromarket. While the OMR-Post Toll area represented only 16% of total transaction volume in Q1 217, we foresee a shift in occupier focus towards the OMR-Post Toll Road along Pallavaram-Thoraipakkam Road as most of the upcoming supply is concentrated in this area and occupiers have already started making large precommitments in the projects under construction. GST Road, Mount Poonamallee High (MPH) Road, Off CBD accounted for the rest of the transaction volume with demand coming primarily from the IT and automobile sectors. Rental values Micromarkets Rental Values 1 q-o-q y-o-y CBD 7-9 % 6.7% Off-CBD 6-75 % 17.4% GST Road % % MPH Road 5-65 % 4.5% OMR-Pre Toll % 16.4% OMR-Post Toll 3-4 % 7.7% Ambattur 3-45 % 1.3% 1 Indicative Grade A rentals in INR per sq ft per month