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.

Demand for larger homes picking up

Mohammed Aslam, Head – Pune, Jones Lang LaSalle Meghraj:

Pune’s real estate market is pulling itself out of the doldrums brought about by the slowdown. Over the last three months, buyers have begun populating the residential market again and are beating a path to various developers’ sites in search of good deals. Apart from a resurgence in positive sentiments, this renewed demand can also be attributed to the fact that HFI has brought down home loan interest rates to 8-8.5% on fixed interest loans for three years, which stands in marked contrast to the 10-11% that prevailed just six months ago.

While Pune’s real estate market was in the deepest throes of the downturn, the 1BHK and studio apartments were practically the only moving products. Today, general buyers preferences have once again evolved to 2-3BHK flats. The most popular price tags currently fall within the range of Rs. 25-35 lakh.

The slowdown has brought about residential space affordability and availability in areas that were previously out of reach for middle-income buyers. Due to reduction in pricing, residential property buyers now have a choice of attractive deals in preferred areas like Baner, Wakad, Kondhwa, NIBM Road and Aundh. There is also a high level of interest in projects along Nagar Road, which now falls in the new IT/ITES growth zone and represents considerable future appreciation potential.

Projects that were put on indefinite hold during the financial crunch are now seeing the light of day, with construction once again on a war footing across the city. Projects that are due to be launched within the next six months are being advertised heavily. For projects to be launched within the festive season, developers are not offering freebies and esoteric incentives but are focusing on price discounts for limited periods. Some of the most significant launches will include those by Pharande Spaces, Gera and Panchsheel.

On the downside, we have been seeing the first stirrings of price escalations in Pune. Based on the fact that the demand revival is still in its infancy, this represents a worrisome scenario which seems to indicate that the slowdown did not deliver a sufficiently convincing message. Owing to the price-conscious buyer profile that generally defines Pune, demand for residential spaces will only continue to grow as long as rates remain rational.

World comes to Dubai seeking answers

Cityscape Dubai to explore how best to survive and prepare for the recovery in a still rapidly changing economic environment

The world of real estate investment is to descend on the United Arab Emirates this autumn to seek solutions from what some have referred to as the first great depression of the 21st century, say the organisers of the Cityscape Dubai.

“With reduced liquidity and many projects on hold, investors, developers, architects, indeed the entire real estate industry around the world, is looking for answers to the same questions,” said Chris Speller, Cityscape Group Director. “How do we survive the recession? When can we expect stabilisation? When will the banks start lending again? When will the crisis turn into an opportunity?”

Cityscape Dubai, now in its eighth year and part of the largest business-to-business real estate investment and development brand in the world, encompasses a major exhibition and a series of conferences taking place at the Dubai International Exhibition and Convention Centre from 5-8 October 2009.

“With the radical worldwide economic shakeout, attention has firmly turned onto realistic perspectives on the real estate investment landscape both globally and regionally,” Speller added. “Thousands of participants from more than 100 countries throughout the world have already registered to attend. They are serious players searching for specific answers, which is why Cityscape Dubai 2009 is embracing realism and transparency.”

Among them are companies such as ING Real Estate Investment Management of Hong Kong. Richard T.G. Price, CEO Asia, said: “It is more important than ever to get first hand insights from our clients and partners as to their objectives and expectations for the real estate markets around the world.”

Similarly, Jesper Koll, President and CEO of Tantallon Research, Japan, said: “We all want to know when the global crisis will turn into an opportunity. Cityscape Dubai is poised to help us find a solution.”

Kosta Petrov, Director of the Cityscape Dubai conference and the World Architecture Congress that runs in parallel, said this year’s event – while still the world’s largest real estate show of its kind – would not be about “out of this world” creations.

“Last year saw the beginning of what is being referred to by some economists as the first great depression of the 21st century,” he added. “With liquidity issues and many project developments still on pause, this year is about how best to survive and prepare for the recovery in a still rapidly changing economic environment. In terms of potential new business opportunities, Cityscape Dubai - as the world’s largest real estate show - has no global equivalent.”

Petrov said the Cityscape Dubai conference will bring together “some of the most powerful investors, developers and economists on the planet.” Meanwhile, the World Architecture Congress (5-7 October 2009) has been put together in association with Continental Europe, Hong Kong, Japan and UK chapters and the International Committee of the American Institute of Architects. “The world’s most respected visionaries will share their experience and outlook in a global recession,” he added.

In addition, the Cityscape Dubai Facilities and Asset Management Conference is on 4 – 8 October attracting delegates in the design, build and post-occupancy of buildings. There will also be a Cityscape Dubai “Green Day” on 7 October which will include green communities, green construction methods, energy saving issues, financing green buildings, regulations, facilities management, whole life costs and new materials and products.

For more information about Cityscape Dubai 2009, please visit www.cityscape.ae

Investors who missed investing in Dubai during its early days...will they try out Abu Dhabi?

With the recent success of Cityscape Abu Dhabi, it is said that the emirate plans to invest Dhs1 trillion, or $270 billion, in new construction projects.

Abu Dhabi, which is just a 2 hrs drive from Dubai, which is the capital of the United Arab Emirates and the richest city in the world. The emirate's 420,000 citizens, who sit on one-tenth of the planet's oil and have almost $1 trillion invested abroad, are worth about $17 million apiece. (A million foreign workers don't share in the wealth) .

Abu Dhabi has been relatively slow in joining the global real estate boom, but now, with great investor interest and good public appetite for owning properties in the region, it is seen as one of the most upcoming investment destinations in the middle east.

The development pattern in Abu Dhabi is noticably similar to the inch to Dubai it is seen to follow the pattern of growth similar to that of Dubai by many. Attractive financing schemes are being offered to investors but yet, one thing that could decide the fate of investments in Abu Dhabi is that in the initial days, Dubai properties were priced on the lower side. Slowly when Dubai became a global hub for investments, coupled with a great government and infrastructural support, now Dubai properties are reasonably on the higher side. In contrast, for example, launched with prices from $2.2 million upwards which might be considered on the high side, although in a new real estate market this could be cheap for a luxury, Maldives-style location.

Currently, where Dubai properies are not really selling on a premium anymore, the growth of a similar opportunity Real Estate market right in the beighbourhood is more seeming like unwelcome competition for Dubai. Since both the emirates belong to UAE and with the growth of tremendous real estate in both these areas, which in Dubai's case have not only been successful in getting investors from Europe and accross the world but people have moved there to make it their home, it probably will do some good to Dubai too in the long run.

Now, it is yet to be seen if Abu Dhabi is able to attract similar interest from investors accross the globe and if investors who put their money comparing it to Dubai actually can makeup for the money they could create at some point by investing in Dubai. Only time will tell!

Contributed By : Pankaj Thukral

Al Qudra sells entire tower in 30 minutes at Cityscape Abu Dhabi

ABU DHABI – Al Qudra Real Estate (AQRE) sold out its Amber Tower within 30 minutes at the official sales launch at Cityscape Abu Dhabi. Amber Tower is the first high-rise building within the Shades development at Shams Abu Dhabi.

“Amber Tower is Al Qudra Real Estate’s first development targeting both UAE and expatriate endusers and investors,” said Claus Peter Rees, AQRE acting CEO. “Cityscape Abu Dhabi represents the perfect platform for a sales launch,” he added.

The Shades Project, which is strategically situated next to Shams Abu Dhabi’s central park and water canals, encompasses five residential towers. Amber Tower consists of 34 floors with studio, one, and twobedroom apartments.

The development will include many modern-day facilities, including fitness and entertainment areas, a day-care centre, a beauty salon and landscaped terraces, as well as a rooftop swimming pool and underground parking area.

The project was designed by one of Canada’s largest design and construction firms, the NORRGroup, and by the architects behind Dubai’s renowned Jumeirah Emirates Towers.
“Our focus lies in delivering premium services while ensuring that our investors receive a maximum return on their investments,” concluded Rees.