Bangalore registered a large spike in supply in 2Q CY10, with Whitefield accounting for 77%. This is on very low supply in the previous four quarters. Vacancy levels remained stable, although in the 16% range, and demand remained moderately strong. Larger transactions have also started as confidence amongst IT/ITeS companies returns. Rents have also started showing signs of a pick-up and we expect them to strengthen, especially in the Outer Ring Road area and for IT SEZs.
In the past two quarters, demand has reached the highest levels since 1Q CY08. However, vacancies remain high, especially in the north-western and north-eastern suburbs. Vacancy levels in the central business district (CBD) in South Mumbai are increasing as tenants move to cheaper locations and larger and more modern buildings. As a result, CBD rents fell 14% y-y, while rents in the rest of the city were flat y-y. Rents have started picking up in the secondary business district (SBD) locations of Bandra-Kurla Complex and Lower Parel although rents in Lower Parel should remain stable now, with supply picking up.
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