PUNE RETAIL REAL ESTATE – THE PREMIUM BRANDS REVIVAL

Anand Dutta, Head (Retail) Pune, Jones Lang LaSalle Meghraj

In Pune, retail transactions have picked up noticeably, following a marked upsurge in shopper sentiments and a generalized correction in retail real estate rentals. Properties are now more viable for retailers, and the current scenario is now considered far more amenable to their bottom lines than it was before. Moreover, an increasing number of retail landlords in Pune’s malls and on key high street locations have opened up to the minimum guarantee and revenue sharing models. The general stance now is that if a retailer is making money, landlords are willing to offer reductions on rentals if the retailer is willing to sharing his topline. As a result, a number of retailers in Pune are now once again looking at expansion. The number of retail space deals has gone up significantly after the Dussera-Diwali period, which many players agree was better this year than in the previous year. Retailers are understandably displaying a predilection for ready properties.

Interest has revived not only in malls but also on Pune’s more prominent high streets of MG Road, JM Road, Aundh’s Parihar Chowk and Kothrud’s Karve Road. The highest activity levels in terms of expansion are currently being witnessed among vanilla retailers in the apparel, accessories, hypermarkets and jewelry categories. As before, value retail rules the roost in a budget-conscious city like Pune. However, we are also seeing a surprisingly fast

revival in terms of premium brands, and transactions for retail spaces in advantageous

locations in malls and on high streets are picking up.

The latest addition to Pune’s high-value retail sphere is Jewel Square at Koregaon Park, next

to Hotel Blue Diamond. This is naturally a premium location with an excellent high-profile shopper catchment, though this exclusive shopping centre encompasses only about a lakh

square feet, the occupier profile over its four levels is remarkable. Jewel Square, which is now

almost 90% booked out, is defined by premium brands who are eager to take advantage of this unique location, which is accessible to the affluent crowd of Pune and also close to other important micro markets such as Vimannagar, Kalyaninagar, Camp - and, of course, Koregaon Park.

Significantly, high-end brands like Mango, Promod, Aldo, Charles & Keith and Tommy Hilfigher are entering Pune’s mall territory for the first time with this project, which launches on 21st November, 2009. Other premium brands at Jewel Square include La Senza, Esprit, Calvin Klein, Forever New, Da Milano, Nike, Apple I Store, After Shock, Hi Design, Ritu Kumar, Chemistry, BIBA, Jashn, Satya Paul, Tie Rack London, Reliance Time Out and BJN Hotels.

Earlier, these high-end brands were shying away from entering the city. The fact that this mall

has garnered such concentrated enthusiasm by premium brands will give a big boost to mall developers for their upcoming projects and open up potential for other high end retailers to look at Pune as a suitable market.

CURRENT PUNE RETAIL RENTALS:

• MG Road: 140 - 170

• JM Road: 160 - 200

• Aundh: 125 - 150

• Karve Road: 100 - 120

HYDERABAD - Q3 2009 Office and Retail Update

Abhishek Kiran Gupta, Head - Research, Jones Lang LaSalle Meghraj

Hyderabad Office Sector - 3Q '09

Hyderabad office market continued to witness an increase in overall leasing activity in 3Q09 as compared to the last two quarters. The CBD (Begumpet, Somajiguda, and Raj Bhavan Road) did not witness any tenant vacating spaces for the first time in the year in 3Q09.However, there were incidents of tenants vacating spaces in SBD (Banjara Hills and Jubilee Hills) and Hitec City. The overall netabsorption witnessed a significant increase in 3Q09. Most of this absorption is due to the completion of the buildings that were pre-leased in the previous quarters. The overall vacancy increased in 3Q09 as compared with 2Q09, due to the high vacancy in the newly completed buildings in suburbs.

The city witnessed completion of three buildings in 3Q09 that include Divyasree Solitaire and Divyasree Trinity II in Hitec City and SecondPhase of DLF Cyber City in Gachibowli. This added about 1.3 million sq ft to the total stock and increased it to 17 million sq ft in 3Q09.The CBD and SBD did not witness any completion in 3Q09. The projects in SBD that are in the final stages of completion continued to move at a

slow pace as they did not witness any leasing.

The overall rental values continued to correct for another quarter in 3Q09. However, the rate of correction has slowed down as compared with 2Q09. Hitec city witnessed the highest correction as compared with the

other micro markets that was about 8% q-o-q (24% of correction from the peak in 3Q08). The capital values remained stable in most of the micro markets that shrank the yield rates in 3Q09.

Hyderabad Retail Sector - 3Q '09

Sentiment in the Hyderabad retail market continued to improve in 3Q09, witnessing a moderated demand. Due to the success of GVK Mall and other malls in the city in attracting strong footfalls, the market condition was optimistic in 3Q09 compared with the previous twoquarters of 2009. Net absorption in 3Q09 increased compared with that in 2Q09. However, despite the slight optimism witnessed by the market in 3Q09, we cannot state that demand has increased and the market conditions are improving based solely on this increase in netabsorption. This is because most of this net absorption came from pre-leased space in the previous quarters in newly operational malls.The high street continued to remain the prime choice of the retailers, where the retailer leased the entire building. Trent Ltd leased twosuch buildings in previous quarters and started their stores of Landmark (at Banjara Hills) and Westside and landmark (at Somajiguda) in 3Q09. There were few incidences of retailers leasing vanilla stores in the newly operational Inorbit Mall. There were no pre-leases recorded in 3Q09.

The IT hub of Hyderabad – Hitec City - witnessed its first mall (Inorbit Mall) going operational in 3Q09. With the operation of this mall, Hyderabad saw its first Hyper City store of about 100,000 sq ft. The MPM Bonsai mall is almost in the final stages of its completion and has been again postponed for another quarter as it awaits final approvals.

The overall rental values corrected by 9% q-o-q in 3Q09. This is about a 44% correction from its peak in 3Q08. The prime central micro market Banjara Hills and Jubilee Hills corrected by 4% q-o-q in 3Q09 and

prime suburbs- Hitec City and Gachibowli corrected by 9% q-o-q in 3Q09. The revenue share and minimum guarantee model continued tostrengthen its hold on the market as Inorbit mall has leased most of

its space in this model.