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BANGALORE A MARKET OVERVIEW
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| From a buyer’s perspective, the supply and demand situation for commercial properties suitable for malls and departmental stores in Bangalore has altered dramatically from 2000 to the present day. |
| Bridging organised retail facilities demand with Commercial Real Property supply.
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- Bangalore, Capital of Karnataka State, recognized as India’s IT hub is the second fastest growing City in India. It has grown exponentially since the new millennium.
- A home to a large number of Multinational corporates, as well as Indian IT giants such as Wipro and Infosys. IT/ITES, BPOs, the City has been a magnet to a wide talent pool creating a demand in commercial real property
- The city has gradually emerged with a new breed of customers. They are cosmopolitan, young, brand conscious, internationally aware, with a high disposable income.
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Retail in the Indian Context- Understanding the micro from the macro: : Retail is considered the world’s largest private industry with total sales of US$6.6 tn. With close to 12 million outlets, India has the largest retail outlet density in the world. The consumer demand for international quality, ambience, convenience and infrastructure will drive future growth.
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Retailing is becoming the next boom industry with organized retail being a market of US$6 bn. It is due to grow eight fold in the coming decade. Retailing grew from about 3% in 2004 and is expected to grow at a phenomenal 20% by the end of the decade. The Total retail industry is growing exponentially at 8.5% per annum and consumer spending has increased at 12% per annum during the last 3 yrs. The Indian consumer today is evolving. The increased purchasing power of the urban educated middle class, more exposure to brands and products through television and foreign trips, and the growing number of working couples has led to a change in buying habits and the retail boom in India today.
Source: Department of Economics & Statistics. The Situation in Bangalore City from 2002 to the present day
At the turn of the century Bangalore had few recognizable malls and departmental stores which totaled about 4,00,000 sq. ft of space. Some of these included Foodworld , Metro Cash and Carry, Spencers, Janata Bazaars and other local stores. These however did not meet the A grade standards
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2002 saw the Transformation of Bangalore’s Retail sector towards an Organized Retail Market.
The factors for Rising demand in the Organized Retail Sector requiring Malls and departmental stores are:-
- Young Population with an average age group of 20- 35 yrs
- A large Growing Middle–class with increasing disposable income.
- Double Income homes enabling enhanced buying power, use of plastic cards and adhering to marketing strategies of brand awareness that enables buying.
- Rising Aspirations in Social circles.
- Brand Consciousness, exposure to overseas lifestyles and influence of mass communication media.
- Need for convenience in Parking, Comfort, choice of multiple brands under a single roof, intentional or window-shopping,
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These Socio- economic drivers directly influence government trade and commerce policies. This was specifically seen in major cities such as Bangalore besides, Mumbai Delhi and Kolkata. In February 2005 the Indian government opened the doors to Foreign Direct Investment ( FDI ) for branded retail. |
Development index by AT Kearney
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Developers who can show most ingenuity in creating an interesting environment, both from a shopping and an experimental standpoint, will be the ones that will create an asset that will withstand the test of time.
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The future of Retail: The expected growth rate of the Retail Sector, i.e., Malls and department stores is about 40%. That is by 2008, the projected requirement of Retail Space in Bangalore is in the range of 10 Million sq. ft. “ Mall space in India is likely to touch 100 million sq. ft by 2008. Of this Mumbai and Delhi would constitute 40%. The remaining will be distributed between Bangalore, Kolkata,Hyderabad,Pune and Ahmedabad.â€source: Indian Realty News
VOLUMETRIC MAPPING OF MALL, DEPARTMENTAL STORES IN BANGALORE - Retail space demand and supply statistics 2002 to 2007. The city had 14 malls of over only 1milion sq ft. (1,00,000 sq. ft). According to real estate consultants nearly 2.4 million sq. ft. of new malls came up during 2006 and this figure climbed to 4 million sq. ft. in 2007
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| Year |
| 2002 |
| 2003 |
| 2004 |
| 2005 |
| 2006 |
| 2007 |
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Demand by consumers |
| high |
| high |
| high |
| high |
| very high |
| Very high |
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Demand by investors |
| not significant |
| not significant |
| not significant |
| 6 million sq.ft |
| 7 million sq.ft |
| 10 million |
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Supply by Real Estate Sector |
| below 1,00,000 sq.ft |
| below |
| below 2,00,000 sft |
| below 2,40,000 lakh |
| 2,40,000 sq.ft |
| 4 million sft |
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The exact data from authorized sources was unavailable.
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The statistics indicate a high demand for Commercial Property for Retail , about 10 million sq. ft for the City during the 4th quarter of 2007, while the supply was only 4 million sq. ft.
In order to meet this demand, the city is evolving new concepts of an integrated gated development of commercial and residential to meet the supply
Demand and Supply for Commercial Properties in Bangalore for Malls and Departmental Stores Malls and Departmental Stores are highly specialized commercial facilities having specific demands in Commercial Real Property. •Anchor tenants - Pantaloons, Levi’s, Planet M, Shoppers Stop, The Home Store
•Franchisee and Departmental chains such as Food world, Namdari, Big Bazaar.•An affluent demography of a young age group with high double income, plastic money, •Financial institutions offering credit facilities. •Government policies regarding SEZ ‘s and FDI’s are the key drivers in Demand and Supply for Commercial Real Property for Malls and Stores.
Factors affecting Demand for Commercial Properties for Malls and Retail stores.
1. Location This is one of the most important components in the principles of Demand and Supply for Commercial Property. Malls need to be located in affluent and densely populated neighborhoods. In Bangalore City’s CBD- Central Business District, Malls and stores that have emerged between 2002 - 2007 chronologically are:-
- MG Road (Bombay Store, Food World, Kids Kemp)•Richmond Road (Shoppers Stop , LifeStyle, Globus)•Magrath Road (Garuda Mall)•Brigade Road (Eva Mall )•Residency (Bangalore Central)•Lavelle Road UB City. · · However there is a short supply of such Real property due to.
- Lack of large land Real Property parcels of over 2 acres
- High property rates - over Rs 10,000 /- sq. ft in the CBD
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- Unfavorable developments in the neighborhood such as drains/squatters/etc.
- Land without clear titles
Commercial Properties in densely developed areas are not suited for mall development as it may lead to congestion, if corrective infrastructure is not implemented.
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MAP INDICATING LOCATIONS FOR REAL ESTATE PROPERTY - RADIATING FROM CBD
It must be noted that commercial properties near the following are not favorable locations
Open drains/natural water bodies which are not barricaded such as Viveknagar. Large Parks lands which are not secured such as Palace grounds and Lalbagh. Emergency services such as Fire Brigade/Hospitals. Special Properties such as those opposite ISCON temple, NIMHANS Tuberculosis Institute
2.Connectivity
- The proposed location needs to have good connectivity both for the merchandise supply as well as for shoppers. Merchandise requires efficient transportation from Rail, Air or Road terminals. Consumers need to be well connected by both Public and Private Transport. Malls are also dependent on connectivity to Offices, Hotels and Residences, rather than being in isolation or disconnected from areas of trade, recreation and dwelling precincts.
- Examples of successful Malls between CBD and affluent neighborhoods are :-
- Airport Road to MG road, (Kemp Fort)
- Hosur Road to Koramangala (Forum Mall and Big Bazar)
- Graphite India Road and Whitefield IT zone (Cosmos).
- Some of the more recent Malls are along the Outer Peripheral Ring Road Hebbal.(Esteem Mall)
- CBD to suburb Mysore Road. Gopalan Mall
3. High visibility and approachability
- Visibility and the frontage to public spaces such as Plazas and Primary Roads are important to demands for commercial Property. Good Malls need to look festive and attractive. Some of the appropriate locations are near
- Junction of Main Roads Garuda Mall
- In the vicinity of MRT stations Mantri Greens Mall Malleshwaram - upcoming
- Junction of Victoria and Richmond road Lifestyle.
4.Infrastructure
- Although Infrastructure in not directly a noticeable factor, it is the most important demand for Commercial Property.
- This includes Electric Power both raw and captive.
- Public Water supply.
- An efficient sewage and garbage disposal network. Standard roads, pavements, Traffic signals, street adjuncts and most of all the zone must be Pedestrian friendly.
Bangalore city has not been able to meet some or all the demands thereby lowering the value of such properties.
Infrastructure Woes , a setback to real estate property supply
As the new malls work on even larger concepts than the current set of malls, their need for space is larger. Real estate in the peripheral areas of Bangalore is all set to witness a boom as the mall developers explore these regions for mall development.
Over the last decade Bangalore’s economic development has grown at 11 per cent per annum. However, the city struggles as its infrastructure has hardly kept pace with the rapid growth.
The vehicular population of about 1.7 million is growing at 8% per annum. The unplanned nature of the city’s design and stalled development projects has led to massive traffic congestions crisscrossing the city through the day.
According to Irfan Razack, “Though in a strong position, we still deliberate before taking up new projects in Bangalore due to the weak infrastructure of the city. We need to focus on core issues like traffic, roads, pavements, power, water and parking management. Bangalore will perish if something is not done immediately.â€
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5. Land geometry and building architecture
- Malls and Departmental Stores need to have large floor plate area.
- Space requirement for handling large pedestrian traffic as well as the spaces for Product Display, within the Mall or Departments store are important factors. Most brands specify high volume for display. Almost all Mall Architecture has been designed on the “Atrium Conceptâ€. These are multi-level spaces that can be viewed simultaneously for multi-volumetric visibility to enhance shopping experience.
- Good malls need to have floor plate specifications of 75,000 sq ft and above to attract international players.
- Malls have a comparatively low vertical floor index of above 5.5 levels which includes the 1.5 levels of Cinema theatres and Food -Court which are located at the upper levels of the Mall Buildings
- Therefore an ideal size of property recommended and in demand is over 2 acres rectangular parcel in the ratio of 1:1.5, or 1:2 (subject to FSI) having main roads on at least two sides on a relatively flat slope Land. The supply factors of the above Property specification have been in the shortest supply as most of the roads are narrow and have created smaller land parcels.
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SOCIOECONOMIC FACTORS AFFECTING DEMAND AND SUPPLY OF COMMERCIAL REAL PROPERTY
Interpretation of the Chart The factors closer to the consumers affect the decision making process, while factors away from consumers affect it at a macro level. Factors that affect behavior at macro level are those such as culture and society. Factors that affect consumer behavior at a micro level include psychological factors and group influence. The arrows pointing between the demand and supply towards the consumer wheel indicates the ideal area of selecting Real Property from a Realtor’s perspective.
IN CONCLUSION THE MOST SUITABLE REAL PROPERTY FOR MALLS AND DEPARTMENTAL STORES ARE INTEGRATED DEVELOPMENTS NEAREST TO THE CENTRAL BUSINESS DISTRICT AREAS OF BANGALORE CITY.
6.Integrated Development.
Government policies such SEZ’s and FDI’s are encouraging Private organisations to buy large land parcels of over 25 acres to provide a comprehensive urban development Plan. •These land parcels are located along the Outer ring road and satellite townships. The integrated Developments have Commercial Office space, group housing and recreational facilities. The developers and planners are including retail spaces to function as a magnet to both residents of the gated development as well as the immediate Neighborhood.
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- Some of the Integrated development between 2002 and 2007 include:-
- Prestige Acropolis adjacent Forum Mall, Koramangala
- Mantri @commerce ,Mantri Elegance along Bannerghatta road
- Manyatha Tech Park outer ring road towards Hebbal , North Bangalore
- Mantri Greens at Malleshwaram.
- Brigade Gateway towards Yeswantpur Bangalore North west.
- Prestige Shantiniketan towards Whitefield
“With a strong demand for both retail and IT space the real estate industry has realized that there is no clear winner in terms of ROI, and hence most would like to have a mixed portfolio.â€
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FROM THE ABOVE STUDY, IT IS CONCLUDED THAT COMMERCIAL REAL PROPERTY FOR MALL AND DEPARTMENTMENT RETAIL WILL BE AN AREA OF SPECIALISATION. WHETHER THE PROPERTY BE IN AN EXCLUSIVE PROPERTY, OR PART OF AN INTERGATED DEVELOPMENT OF COMMERCIAL AND GROUP HOUSING, MALLS SHALL CONTINUE TO BE STRONG SECONDARY DRIVERS OF COMMERCIAL PROPERTY. MALL AND RETAIL WILL OCCUPY THE PRIMARY LAND PARCEL OF ANY MIXED LAND DEVELOPMENT FROM INVESTOR PREFERENCE, BUILDING ARCHITECTURE, INTERIOR DESIGN AND URBAN LANDMARK AS A SPECIALISED AND COMPLEX SEGMENT IN THE FIELD OF REAL ESTATE |
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Author- Mr. Vivek Uthaiah - India Institute of Real Estate
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