Demand for space in malls in Bangalore remained weak during the third quarter. However, large-format retailers, such as Reliance and the Future Group, expanded in the city’s high streets.
Net absorption during third quarter was 585,000 sq ft. The high streets in Indiranagar, Koramangala, Whitefield, BEL Road and Old Madras Road accounted for 116,646 sq ft of leasing activity. Overall vacancy rates increased from 4.9% in second quarter to 7.9% in third quarter due to the completion of the Park Square Mall in Whitefield and Soul Space Arena along the Outer Ring Road, each with an average occupancy rate of about 66%, according to Jones Lang LaSalle’s Asia Pacific Digest.
Key transactions during third quarter included Reliance Digital’s lease of about 21,000 sq ft in the high street on Residency Road and Inmark’s lease of 14,000 sq ft on the high street on Infantry Road in the Prime City submarket, Tanishq leased 10,000 sq ft in Jayanagar and Hyundai leased 5,400 sq ft on Airport Road, both in the Secondary sub-market, while, in the Suburbs sub-market, Bodycraft leased about 7,200 sq ft in Whitefield.
Supply
The Park Square Mall by Ascendas completed in Whitefield in 3Q11, adding a built-up area of 450,000 sq ft to the market and Soul Space Arena along the Outer Ring Road added a built-up area of 250,000 sq ft. The Park Square Mall commenced operations with a healthy occupancy rate due to good pre-commitments in previous quarters, and has such anchor tenants as Spar Hypermarket and Inox.
Asset Performance
Rents in the prime and secondary sub-markets remained stable at second quarter levels in third quarter, while those in the Suburbs sub-market rose marginally by 3.7% q-o-q due to the completion of the Park Square Mall by Ascendas, where rents are above the sub-market’s average.
Capital values in malls in the Prime City and Secondary sub-market also remained stable, although they increased by 4.4% q-o-q in malls in the Suburbs sub-market as these spaces commenced operations with healthy occupancy rates. Moreover, the Park Square Mall by Ascendas demanded a capital value above the sub-market’s average.
Outlook
With some 54% of the expected supply in second quaarter already pre-committed, net absorption is forecast to increase to 2.3 million sq ft of the total annual supply of 3.3 million sq ft by end-2011. With low leasing activity, Bangalore is unlikely to see a significant increase in demand for at least another six months. We do not expect demand to keep pace with supply and vacancy rates are forecast to increase from 7.2% in third quarter to 7.7% at end-2011. Despite this, rents will recover across all sub-markets by the end of the year as new, good-quality malls come on stream.
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