India Retail

www.cbre.co.in January to June 2010

The first half of the year 2010 may be described as one of increased retailer interest; national as well as international retailers who were earlier cautious in their approach have started booking space in prime markets across high streets and malls. The mood in the market is upbeat, perhaps reflective of the sustained growth in the economy and resultant increase in consumer spending. With the medium to long-term prospects for the domestic market appearing increasingly optimistic, brands are progressively keener to take the plunge and increase point of sales. The recessionary phase has been a learning period for all. Retailers are becoming more cautious in their approach towards retail space and are more conscious of footfalls, tenant mix and conversion rates before committing to retail space options. Furthermore, developers have become more understanding of the tenants needs and are willing to offer a number of incentives to ensure higher and sustained occupancy. The Minimum Guarantee (MG) coupled with revenue share model has become more acceptable, with developers and retailers looking to partner each others success. This flexibility has allowed retailers to reassess their positions and develop their brands in specific retail micro markets. The growth in the overall retail market appears to be driven largely by the fast expanding organised retail market. Domestic retailers continue to invest heavily in increasing their store networks and improving in-store offerings, and the impact they have on growth will be boosted by the arrival of expansion-orientated multinationals. The concept of shopping as a whole has altered in terms of format and consumer buying behavior, ushering in a revolution in shopping. Retailers are more aligned to Standards-based architecture and software support to all

kinds of mission-critical IT applications for enabling greater efficiency, significant cost savings, and new business value. The focus is on finance and accounting, business intelligence, vendor development and management,

supply chain management, merchandising and inventory management, facilities management, stores management and customer relationship management. In all the seven cities presented in this review the retail real estate market appears to be promising with an appreciable increase in enquiries being witnessed from retailers. With improving market sentiment, the numbers of transactions are expected to increase. In addition to this, market stability and increase in consumer spending is likely to provide a boost to the retail sector in India. National Capital Region (NCR) Market Summary The 1st half of 2010 has seen some movement towards the positive in the Delhi retail segment. While rentals in Grade A retail spaces observed a marginal increase, rentals in non prime markets continue to observe sustained corrections. This is evident from retailers shifting focus to prime retail space, in spite of the related premium rentals. The past quarter was noteworthy; for it marked the India entry of international apparel giant Zara, with its flagship outlet opening up at Select Citywalk, Saket. The coming months should also observe the market entry of other prominent international brands like Jack & Jones, Forever 21, Diesel, Timberland and Ecko in the city. There has also been a visible trend in the F&B space, with multiple coffee chains and casual diners such as Gloria Jeans, Segafredo Zanetti and Mocha mushrooming across

2010, CB Richard Ellis, Inc.

the city. Retailers are increasingly looking to tap the youth segment, with international fashion brands, simulation gaming zones and coffee bars foraying actively into acquiring retail space. Additionally, big box retailers and grocery hypermarket players are looking to expand their foot print and are actively scouting the market for spaces. Prime high streets like Khan Market and South Extension continue to hold interest, with the launch of several local eateries, apparel players and electronics giants like Mamagoto, Accessorize, Editions, Daniel Hechter and Croma. The next few quarters appear encouraging vis-avis retail supply, with the completion and launch of mall developments in West Delhi, South Delhi and Gurgaon. Developers are also looking to revive projects that had been stalled, or delayed in Delhi NCR during the recessionary period. Rental Trends Rentals in Delhi NCR are moving towards stability after an extended period of correction over the past few quarters. While Grade B markets have observed corrections of 5 10% Grade A retail spaces are close to their pre-recessionary rentals, with a 1015% increase in rental values over the past few quarters. In addition, a growing number of retailers and developers are taking the Minimum Guarantee (MG) and Revenue Share route to partner each others success. Outlook

High Streets-NCR

ORGANISED RETAIL
Mall clusters Average rental (Jan June 10) Per sq. ft./ per month Average rental (July Dec 09) Per sq. ft. /per month

Saket district centre Vasant Kunj Noida Gurgaon

150 - 350 150 - 250 150 - 250 100 - 200

100 - 300 100 - 200 100 - 200 100 - 200

Mall Clusters-NCR

The outlook for the retail real estate market appears promising, with an observed increase in retail activity as well as plans of future growth for existing and upcoming retailers. There is movement in the sector, but retailers are also watchful and judicious of the specific micro markets and retail hubs that they are looking to

HIGH STREET RENTALS

High Street Average rental (Jan June 10) Per sq. ft. /per month 900 - 1100 500 - 700 250 - 350 500 - 700 Average rental (July Dec 09) Per sq. ft. /per month 800 - 1000 400 - 600 250 - 350 450 - 550

target. Further, developers have become more agreeable to tenants needs and are willing to work out a mutually beneficial arrangement. Going forward, the market appears increasingly buoyant as newer international brands evaluate their entry into the Indian retail sector. Prime high streets and malls should continue to dominate retailer mindspace with limited availability.

Khan market South Extension Basant Lok Connaught Place

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Mumbai Market Summary The Mumbai retail market has seen a slow recovery after the slowdown of 2009 as the latter half of the year saw two prominent projects being launched; Palladium at High Street Phoenix and R City Centre (Phase 1), though these projects reached 80% occupancy levels only in Q1 2010. Palladium is positioned as premium mall and boasts of prominent international brands making their debut in Mumbai or in some cases even India. These brands include Zara, The Comedy Store, Bo Concept, Burberry, Hugo Boss, Canali, Diesel, Sunglass Hut, DKNY, CK and Manchester United Caf & Bar among others. R City Centre is one of the largest organised developments Mumbai city has experienced and after a lukewarm response the project has gained better acceptance and brands are now reporting better conversions. The traditional high street destination of MumbaiLinking Road witnessed the opening of a number of new stores such as CK, FCUK, Adidas Essentials, Guru, Maple Technologies etc. Retailers consider it essential to have a presence on this stretch and enquiries from them are steady through the year, even though the rentals are prohibitively expensive and the concept of revenue sharing deals is not encouraged by high street landlords. The high street of Juhu Tara road also saw the opening of the brand Diesels flagship store in the country. Rental Trends Due to a slump in market conditions developers had delayed delivery of projects as rentals also dipped. However with the recovery, off take has improved and this has led to a scarcity of supply due to limited number of new developments resulting in a slight rise in rentals. With market sentiments improving and an increase in consumer spending retailers are reporting

better sales in the first half of 2010 thus benefiting developers who have signed revenue sharing deals with the retailers. The rental trend for high streets remains constant as

India Retail

there was limited new supply / churn in the traditional markets of Linking Road & Colaba and with the increased activity & enquiries rentals have increased substantially especially on Linking Road.

HIGH STREET RENTALS High Street Average rental (Jan June 10) Per sq. ft. /per month 650 - 800 400 - 500 400 - 500 Average rental (July Dec 09) Per sq. ft./ per month 400 - 600 350 - 400 350 - 450

Linking Road Colaba Causeway Kemps Corner

High Streets- Mumbai

ORGANISED RETAIL Mall clusters Average rental (Jan June 10) Per sq. ft. /per month Average rental (July Dec 09) Per sq. ft. /per month

Central Mumbai

250 - 300 170 - 225 150 - 180

175 - 300 130 - 210 100 - 150

Western Suburbs Eastern Suburbs

Mall Clusters-Mumbai

January to June 2010

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Pascucci, Brand Calculus, etc. Local and regional fine Outlook There is a perceptible increase in enquiries from retailers which should continue for the next 12 months and the clear focus would be on Grade A developments and prime high street locations. Approximately 7 lakh sq.ft. of organised Grade A supply is expected by the end of this year. Most of this supply would be pre-leased to prominent national and international brands hence developers would be in a position to command a premium to retailers looking to enter these projects at a later date. Additionally supply of quality high street space would be limited, leading to landlords continuing to quote high rentals. After being overtly cautious last year retailers are once again looking to expand but with caution. They would like to avoid repeating mistakes which caused them to shut or wind up non profitable/ unviable locations. dining chains like Umerkot, Ping, Via Milano, etc have also been on the expansion trail with many of them spreading their reach in premier locations or in mixed use developments like Prestige Shantiniketan or Brigade Gateway. Hypermarkets like Bharti-Walmart are tying up properties across their various formats for their initial roll out while existing favourites like More Megastore, SPAR and Star Bazaar continue to aggregate and expand their footprint across the city and in Tier II cities in Karnataka as well. Other formats like apparel, electronics, home stores, office supplies, etc are on a progressive expansion plan and these are induced by major players like Louis Philippe, Allen Solly, Celio, Croma, Evok, Staples, etc. On the organised retail front, Royal Meenakshi Mall on Bannerghatta Road seems to be the project that has caught everyones interest and after having Cinepolis on board as the multiplex operator, the first half of this year has seen space being taken up by Star Bazaar, Landmark, Westside, Amoeba, Madura Garments, Barista, AppleOfMyI, etc. The development is expected to be handed over for fit outs by August and BANGALORE Market Summary The momentum from the end of 2009 continues in 2010 with high streets leading the way for retailers expansion. Main markets like Indiranagar 100 Feet Road, Jayanagar 11th Main, Jayanagar 9th Block and BEL Road apart from the CBD locations like Commercial Street, Brigade Road, Lavelle Road, Vittal Mallya Road and MG Road have continued to be on the main target list of retailers expanding as well as new entrants into the market, with Harley Davidson on Lavelle Road being the most noteworthy mention. F&B players continue to be the premier among the retail formats expanding with Yum! Brands and McDonalds right at the front apart from other international players like TGIF, Costa Coffee, Cafe operations are expected to commence from October which will commemorate with the Dussehra festivities. Another major retail development on the same road by a prominent developer will be open by Q3 next year and already has major players on board like Lifestyle, SPAR, PVR and Blue-O, thereby converting this micro market into a future retail destination. SoulSpace SPIRIT on Outer Ring Road which has Central as the main anchor and Cinemax as the multiplex operator is expected to open by the year end while all the other developments under construction which were to open in Q4, 2010 or Q1, 2011 like Inorbit Mall, Orion Mall, Market City and Park Square Mall are at least 12 to 18 months away. The Collection at UB City has witnessed a new change and Diesel has opened their third location in the country with an approximate size of 5,000 sq.ft. while

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the opulence of brands like Jimmy Choo, Bottega Veneta and Etro will be available to its avant garde customer within a few months time. Rental Trends

Mall Clusters-Bangalore

India Retail

2010 continues to witness a stable market with most locations maintaining similar rentals to the latter half of last year. Jayanagar has witnessed a marginal increase with a constriction in the supply chain, while Indiranagar 100 Feet Road has come down marginally with an increase in the property pipeline. Revenue share agreements seem to be increasing as owners are opening up to this concept apart from developers who started embracing this change last year security deposits have also seen reduction. Outlook Apart from the opening of Royal Meenakshi Mall towards the end of the year, the buzz and excitement continues to grow among retailers; and high streets will continue to dominate the retailer ethos. The city can look forward to many new brands and specialty retailers making an entrance and this will present an increased
Average rental (July Dec 09) Per sq. ft./ per month

HIGH STREET RENTALS High Street

Average rental (Jan - June 10) Per sq. ft. /per month

experience offering to the consumer. In spite of all this interest and activity, real estate owners and developers are maintaining a healthy asking rate and rentals/ values seem to be attractive for increased expansion.

Commercial Street Brigade Road Jayanagar 11th Main, 4th Block 100 Feet Road, Indiranagar

190 - 230 200 250 140 - 160 110 - 130

190 - 230 200 - 250 120 - 150 110 - 140

CHENNAI Market Summary

High Streets-Bangalore

In the last year the city has witnessed one mall Ampa Skywalk coming into operation and around 6 malls under construction which would become operational over the next 2 years. Amongst the upcoming malls, Express Avenue a CBD mall which is of 0.7 million sq.ft. is one of the most anticipated launches, considering its location and the retail mix;

ORGANISED RETAIL Mall clusters Average rental (Jan - June 10) Per sq. ft./ per month
120 - 140 60 - 80 60 - 75

this mall is partially operational with a handful of stores

Average rental (July Dec 09) Per sq. ft. /per month
120 - 140 60 - 80 60 - 75

and will be completely operational by Q3, 2010. Other large retail developments include Phoenix market city which is a 1 million sq.ft. integrated development located at Velachery and Junction mall which is about 0.8 million sq.ft. located at Old Mahabalipuram Road
January to June 2010

CBD
South Bangalore East Bangalore

(IT Corridor).

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Over the past year, the perceived slump in the retail sector has led to retailers renegotiating the existing contracts in the organised retail sector. The market has witnessed a correction in the rentals both in shopping malls and high streets. However all 3 operational malls in the city have managed to retain their occupancy rates. The high occupancy rates in the mall can be attributed to the limited supply of organized retail supply in the city. High streets continue to be the growth drivers of the retail industry in the city. They mostly comprise of Large format standalone stores like Croma, Odyssey, Nallis, Saravana Stores, Kumaran, Pothys, etc, which continue to witness strong retail demand. Lack of quality supply continues to challenge the growth of these high streets. H1 of this year has witnessed an improvement in the retail market and it has been evident from the increase in retailers expansion plans. This scenario has definitely cascaded onto developers and individual owners. Currently, with the market stabilizing, supply is expected to rise in the coming years which is a positive sign for the city where supply is always a challenge. Rental Trends Even though Chennai has always been an owner driven market owing to its supply woes, the economic scenario led to a rationalisation of retail rents. The negative effect of this scenario was more visible in malls vis-a-vis the high streets. Retailers utilised this situation to reduce their expenses which includes rentals, operational costs, downsizing format sizes, holding expansions and renegotiating rents. During the past 6 months, the market has witnessed a revival in retail rental but growth has been slow; the primary reason being the cautious approach from the retailer after the economic slowdown. The rentals have marginally improved, which is more visible in the high street than the malls due to lack of supply in the high

street. There are few exceptions where retailers were ready to pay a premium rental in few upcoming malls which are located in the heart of city. This indicates that the retailers are still optimistic about their business and a substantial revival is being expected in the retail market in the coming years. HIGH STREET RENTALS High Street Average rental (Jan June 10) Per sq. ft./per month 120 - 140 130 - 150 90 - 110 70 - 90 110 - 140 85 - 100 Average rental (July Dec 09) Per sq. ft./per month 90 -120 90 -120 75 - 90 60 - 80 100 - 130 90 - 120

Nungambakkam High Road T Nagar Pondy Bazzar Anna Nagar 2nd Avenue Velachery Adayar Alwarpet

High Streets-Chennai

ORGANISED RETAIL Mall Clusters Average rental (Jan June 10) Per sq. ft. /per month Average rental (July Dec 09) Per sq. ft./per month

Spencer Plaza Chennai Citi Center Ampa Mall

150 - 200 150 - 250 180 - 200

150 - 200 175 - 250 180 - 200

Mall Clusters-Chennai

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Outlook The organised retail market in Chennai is in a very nascent stage even though this city has the credit of developing the first shopping mall in the country- Spencer Plaza. The year 2010 is anticipated to be a revival year with 2 new shopping malls expected to be operational. The much awaited Express Avenue which is partially operational and is expected to be a bridge to the citys new shopping experience. Chennai is going to witness a big size shopping experience in the next 2 years and this is expected to change the conservative mindset of the resident and help the city to attract new investors and retailers alike.

HIGH STREET RENTALS High Street

Average rental (Jan June 10) Per sq. ft. /per month

Average rental (July Dec 09) Per sq. ft. /per month

Himayatnagar Jubilee Hills Road No 36 Banjara Hills Road No 1

100 - 110 100 - 115 80 - 95

95 - 105
100 - 110 95 - 105

India Retail

High Streets-Hyderabad

ORGANISED RETAIL

HYDERABAD Market Summary In spite of good market recovery across all major markets across India, Hyderabad has not recovered very well due to a sequence of unfortunate series of events like Satyam, YSR & The Telangana issue happening from time to time. Though the number of transactions which took place in the first half of 2010 are substantially higher than that of the second half of 2009, most of the brands are not very comfortable in opening company owned stores and are delegating their risk by entering into the franchisee model and making local investors invest in the store. Rental Trends After a long wait and a poised market, things have started looking better and the number of transactions happening provides some positives for the future. In spite of transactions happening in most of the micro markets and brands showing interest in Hyderabad, the rental graph stands still and has shown no positive movement this is primarily due to the developers desperation created by the oversupply.

Mall Clusters

Average rental (Jan June 10) Per sq. ft. /per month

Average rental (July Dec 09) Per sq. ft. /per month

Banjara Hills Road Nos. 1, 2 & 12

60 - 70

75 - 85

Mall Clusters-Hyderabad

Outlook Going forward the Retail market shall improve as the number of transactions happening indicates that the market sentiment is improving and the oversupply trend will not sustain for very long. This improving market feeler is very strong amongst most of the big developers as well, which has given them confidence and support to start their retail projects which they had put on hold for a few years.
January to June 2010

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PUNE Market Summary Retail Sentiments in the initial half of 2010 were more positive largely contributed by stable economic scenarios. In 2009, Pune witnessed interesting developments like Jewel Square, a premium mall development located at Koregaon Park reaching 100 % occupancy level with a very high degree of acceptance in the target markets in 2010 and Store One an aspirational format from Indiabulls, located at Senapati Bapat Road, which also housed many first time premium labels like Leconet Hemant, Alcott, Boggi etc. shutting down on accounts of poor acceptance level in its target market. In the first of half of 2010, large space take ups were limited to fitness centres like Anytime Fitness opening their first outlet in Pune (11,500 sq.ft.) and Air Fitness opening their second outlet at Viman Nagar (16,000 sq.ft.). Rental Trends The economic recession had led to a decline in retail rentals over the previous year as most of the regions saw corrections ranging between 10 to 15%. However, a positive outlook and signs of an economic revival over the past few months have stabilized the rentals across high streets and mall developments. The rentals are likely to remain stable primarily in the central and Eastern corridors of the city.
HIGH STREET RENTALS High Street
Average rental (Jan June 10) Per sq. ft./ per month

High Streets-Pune

ORGANISED RETAIL Mall Clusters Average rental (Jan June 10) Per sq. ft./ per month
200 - 250 100 - 140 120 - 160 130 - 170

Average rental (July Dec 09) Per sq. ft. /per month
200 - 250 100 - 140 120 - 160 160 - 200

MG Road Ganeshkhind Road Nagar Road Koregaon Park/ Bund Garden Road

Mall Clusters-Pune

Outlook The organised retail market in Pune is poised to grow at a faster rate as retail markets in the city stabilize and retail projects which were stalled and delayed, restart. The primary reason for the same has been the onset of the economic slowdown in 2008 which curbed retail spending as most people in the city were keeping their expenses to a minimum. Currently with the markets stabilizing, consumer spending has increased and if sustainable, is likely to provide a major boost to malls in the city.

Average rental (July Dec 09) Per sq./ ft.per month

MG Road JM Road Aundh Koregaon Park

180 - 200 200 - 240 100 - 150 100 - 150

180 - 220 200 - 240 100 - 150 100 - 150

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Currently Pune is witnessing oversupply of organized retail supply which is higher than the anticipated demand. Hence forth, the rentals may see some corrections in coming months due to excessive supply and demand mismatch resulting in all majors developers postponing or shelving all their retail developments especially along the eastern corridors of the city.

HIGH STREET RENTALS

High streets Average rental (Jan June 10) Per sq. ft./ per month
260 - 270 145 - 155 120 - 140

Average rental (July Dec 09) Per sq. ft./ per month
175 - 225 140 - 190 130 - 180

Park Street Elgin Road Shakespeare Sarani, Camac Street

India Retail

High Streets-Kolkata

KOLKATA Market Summary The retail market in Kolkata took a hit as any other sector in the prime of recession. There is always a market to absorb supply but the percentage increase forecasted did not come through. F&B has seen steady sale and even growth in some pockets, with expansion of brands like Cafe Coffee Day, Barista, and Subway. Planned expansion of certain brands like Titan Eyewear, Eye+, as well as Nike and Reebok factory outlets have seen them reaching the farthest of city limits. Fabric and Dress Material has seen some slump. Even the festive seasons recorded less sale figures Y-O-Y. However overall the market is moving steady. Although brands that set up earlier on the intuition of huge retail market expansion have been proven wrong; retailing across unorganised market is doing well. Organised retailing has not seen much promise. This trend is in conformation with the last two quarter of 2009. Rental trends The rental trends have seen a dip in early part of 2010 as continued from 2009. As of now the rentals are showing a little upward trend. This is more pertinent with regards to unorganised retail markets of Gariahat and New Market, as well as high street areas like Park Street, Camac Street and Elgin Road area. The organised retailings in malls are out of this trend as their rentals are already stretched for them to breakeven. The rise in rental is nominal approximately 10-12%. EM Bypass Salt lake Jadavpur

ORGANISED RETAIL Mall Clusters Average rental (Jan June 10) Per sq. ft./ per month
110 - 25 240 - 250 180 - 200

Average rental (July Dec 09) Per sq. ft./ per month
110 - 125 240 - 250 180 - 200

Mall Clusters-Kolkata

Outlook
The retailing market here has always been riding strong on the back of a strong end market demand. The recession brought about jolts due to more than one direct and indirect reason. That effect is slowly dying out for the mall market to gather enough momentum, it will be a wait and watch issue on the other front of retailing, from
January to June 2010

consumer electronics to household F&B, the road ahead is only started getting bigger.

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India Retail

About CB Richard Ellis CB Richard Ellis Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the worlds largest commercial real estate services firm (in terms of 2009 revenue). The Company has approximately 29,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CB Richard Ellis offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. CB Richard Ellis has been named a BusinessWeek 50 best in class company for three years in a row. Please visit our website at www.cbre.com CB Richard Ellis was the first independent international Real Estate consulting firm to set up office in the Indian sub continent. Over the last 15 years, the Indian operations have grown to a network of offices in all the major metropolitan cities. Today with over 1800 professionals, CB Richard Ellis is one of the leading Real Estate consultants in the Indian subcontinent. Please visit us at www.cbre.co.in

Copyright 2010 CB Richard Ellis (CBRE). We obtained the information above from sources we believe to be reliable. However, we have not verified its accuracy and make no guarantee, warranty or representation about it. It is submitted subject to the possibility of errors, omissions, change of price, rental or other conditions, prior sale, lease or financing, or withdrawal without notice. We include projections, opinions, assumptions or estimates for example only, and they may not represent current or future performance of the property. You and your tax and legal advisors should conduct your own investigation of the property and transaction.

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