JLL Forms India Desk in Dubai to Boost Cross-border Realty Investments

Jones Lang LaSalle (JLL), the leading real estate investment and advisory firm, has announced the launch of its ‘India Desk’ in Dubai, a new medium aimed at facilitating cross-border investment between India and the GCC.

This new initiative will support GCC investors in managing their real estate investments and holdings in India while also advising investors and developers from India on entering the UAE and wider GCC markets. The desk is currently advising investors in Dubai to fund a development project in Mumbai, and is also shortlisting land acquisition opportunities in India for an Abu Dhabi-based group.

Anuj Puri, Chairman and Country Head, JLL India said: “We continue to see a significant interest from investors and developers from the GCC for India, and vice versa. By establishing this channel, we will ensure that our clients receive the same high quality of services that they are accustomed to across the globe.”

Commenting on this new initiative, Gaurav Shivpuri, Head of Capital Markets JLL MENA said: “India has had a long-standing partnership with the UAE, and it continues to play a huge role in the region’s economic success. As business interests resonate across borders, it is an opportune time to set up a platform to facilitate cross-border investments.”

The desk will be led by Swati Shanker, Lead – India Desk, who is based in Dubai and Amit Pande, Head of Private Wealth, India & Middle East,  based in Mumbai.

Real Estate 2015 to bring more good news to home buyers

The year 2014 has been quite fruitful for the real estate sector in India in terms of business sentiments. The real effect of many of the policies and amendments announced in 2014 will take effect in 2015, says Anuj Puri, Chairman and Country Head of Jones Lang Lasalle, India.

Starting from Union Budget FY2014-15, where affordable housing was considered on par with infrastructure, to relaxation of rigidity in the Land Acquisition and Real Estate Regulatory Bill, the Indian real estate sector is receiving consistent doses of energy, he says.

Also, REITs are to hit the market at last, and only a few details need to be sorted out before they get the funding wheels spinning. The winds of change are now blowing more perceptibly and 2015 will definitely be a good year for the real estate sector on three counts:

The threat of inflation has completely submerged, and borrowing rates are to go down. Property prices staying stable and good deals being offered by developers in order to clear their inventory, fence-sitting home buyers will be finally encouraged to press the ‘buy’ button.

Economic activity is gradually picking up, and the GDP growth is to reach 6.5% y/y in the next financial year - FY2015-16. As per few reports from recruitment agencies, corporate India will be hiring more of talent due to the rising business activity in 2015. Put together, this means a very favourable market for both residential and commercial real estate.

The developers are finally coming in with the kind of supply that is relevant to demand. They are now largely focusing on affordable homes. This will go a long way to bridge the existing wide gap between demand and supply of affordable homes, Puri concludes.

Resale home prices may dip further: JLL

Mumbai: With around 36 new residential projects launched over the last three quarters at almost 15-35 per cent cheaper rates than those for resale properties, the secondary home segment in Mumbai has come under immense stress pushing it into near stagnation, PTI report quoting a recent survey, said.

According to property consultant Jones Lang LaSalle (JLL), city developers, who fear competition from the resale property market are selling new properties at lower prices, which may force the latter to take corrective measures on pricing.

"There has been a robust demand for new launches as the prices are much lower than the resale properties. The registration data for secondary sales in Mumbai shows that prices of resale homes have, in fact, stayed aggressively high even though actual transaction volumes have failed to justify them," JLL CEO - Residential Services Om Ahuja said.

The data shows transaction volumes have become increasingly stressed.

"It is a self-evident market truism that high prices cannot sustain in an environment wherein volumes do not support them. The prices on Mumbai's secondary sales market will have to come down so as to sustain buyer interest," he said.

Given the pricing war being waged by the primary sales market, the situation does not call for a mere softening of prices, but a full-scale correction in the resale property prices, Ahuja observed.

The report noted the registration data over the past three quarters revealed an increasing number of the city's home buyers and investors are moving towards new launches as their objective is to capitalise on the significant price advantage that these projects offer.

"With discounts hitherto unheard of in Mumbai's notoriously pricey residential market, the visible shift in the preferences of potential buyers from the resale to the primary market presents no mystery," he said.

In the first quarter of 2014, city's western and central suburbs witnessed the most new residential launches as well as robust absorption. In the same period, transaction volumes on the resale market of these precincts were very minimal.

JLL strengthens leadership in Delhi NCR and Chennai

MUMBAI: Leading property consultancy firm Jones Lang LaSalle (JLL ) India has announced a major realignment in the leadership team for its Delhi NCR and Chennai businesses. 

The move will further strengthen the company's position with regards to its established businesses in Delhi NCR and South India, the company said in a release.

While Badal Yagnik, who was earlier heading Chennai and Coimbatore, has assumed the role of Managing Director - Delhi NCR, Sarita Hunt, who was looking after Chennai's commercial office real estate domain, has taken up the baton from Badal Yagnik to spearhead the operations in Chennai and Coimbatore.

Based out of Gurgaon, Badal will be responsible for driving the firm's transaction businesses in this region and ensuring further growth in terms of revenue, product offerings and business scale.

During his successful tenure in Chennai and Coimbatore, Badal significantly scaled up the firm's business in this key market across multiple service lines, bringing into play his highly evolved cross-selling skills.

This background, as well as his familiarity with and excellent connections in the Delhi NCR market, equip him to significantly amplify his success record in his new assignment.

Commenting on the prevailing commercial real estate scenario in Delhi NCR, Badal says, "The demand for office real estate in NCR will pick up after the general elections, and this will drive up rental levels. 

Anticipating this, corporates are showing a lot of interest in acquiring space and renegotiating their real estate portfolios ahead of the lease tenure while the rentals are still stable."

The NCR commercial office space saw net absorption at a nine-year low in 2013. However, overall transaction volumes were higher than in 2012, indicating an increase in leasing activity in the office market. Consolidations and relocations were the major demand drivers over the past year, and
improving global business sentiments are likely to increase office space requirements for both expansion and consolidation needs going forward.

Continuing to be based out of Chennai, Sarita Hunt will be responsible for further growing JLL's business footprint as well as advancing the firm's leadership position in the city.

Sarita Hunt has already distinguished herself by substantially increasing JLL's share of business in Chennai's commercial office real estate domain. Her demonstrated abilities in client relationship management and operational expertise within the Chennai market give her a strong footing to take on this next level of leadership.

Sarita says, "I am indeed excited to take up this responsibility at an important juncture for Chennai's real estate market. With heightened competition for Grade A office space in the city's preferred micro-markets and the decrease in vacancy across the secondary business districts, Chennai will now witness a moderate increase in rentals, especially in these occupier-favoured locations. This represents a major opportunity for developers looking at new commercial real estate projects there to take advantage of the inherent demand and capitalise on the lack of supply. The average demand for office spaces in Chennai in 2014 stands at approximately 3.5 million square feet."

JLL closes first round of real estate fund

Leading property consultant Jones Lang LaSalle's Segregated Funds Group has achieved the first close of its maiden real estate fund in India.  The Residential Opportunities Fund-I, had raised Rs101 cr commitments in its first closing, in line with the R300 Cr total fund raising target.The fund will invest in the residential sector in prominent location across seven cities in India, namely Delhi NCR, Mumbai Metropolitan Region (MMR), Bengaluru, Chennai, Kolkata, Hyderabad and Pune.

Segregated Funds Group had also confirmed on investing R30 Cr from the R300 Cr fund in city-centric luxury residential project in Bangalore.

Jones Lang LaSalle is a financial and professional services firm specializing in real estate services. With annual revenue of $3.9 Bn, and operates in 70 countries from more than 1,000 locations worldwide.

LaSalle Investment Management, an independent subsidiary of Jones Lang LaSalle, manages $46.7 bn of private and public property equity investments, which invest only in real estate.

The segregated funds group is Jones Lang LaSalle's investment management business in India. It is a new entity setup by the global consultancy firm to raise a series of funds with dedicated investment themes for the Indian Real Estate Market.

Last month, The Capital Markets division of leading international property consultants JLL India had successfully concluded its largest M&A real estate deal in Pune for 2013.

LaSalle Investment Management also raised £238 Mn 'LaSalle Residential Finance I'.

In April, Jones Lang LaSalle (JLL) planned to raise a second fund which would focus on commercial real estate with corpus of R1,200 Cr. The fund was expected to be launched by the end of the year.

Last year, JLL had got the green signal from SEBI to launch its first residential focused fund in India. It planned to raise $57 Mn.

According to management consulting firm, Bain & Company's latest report on private equity in India, real estate investments have halved, from $3.4 Bn in 2011 to $1.8 Bn in 2012.

Companies Looking to Real Estate Purely for Cost Cutting Face Major Financial and Operational Risks: JLL

SINGAPORE:   A recent Jones Lang LaSalle (JLL) report reveals that companies that view real estate assets singularly as a source of short-term cost reduction are actually incurring hidden long-term financial and operational risks. 

JLL’s second biennial report on Global Corporate Real Estate Trends unearths the five top corporate real estate risks, including possible negative impacts to competitive advantage and profitability from cost cutting, procurement processes, lack of collaboration between functions and failure to drive productivity.

The 2013 survey, which measures insights from more than 630 corporate real estate executives in 39 countries, points to the prodigious pressure corporate real estate decision-makers are under as 68 percent of respondents recognize increasing demand from senior business leaders to enhance productivity of the real estate portfolio.

“The global financial crisis moved real estate up in importance to CEOs as a tangible lever for enhancing revenue growth. Our survey shows that more CEOs today are realizing that investing in long-term, revenue-focused corporate real estate strategies can best leverage their real estate assets to mitigate risks and increase long-term profitability,” said John Forrest, Global Director and CEO of Jones Lang LaSalle’s Corporate Solutions business in Asia Pacific. “While short-term cost cutting is tempting, sustainable financial and operational benefits are more often achieved when cost reduction and revenue-enhancing investments are considered together.”

JLL addresses the outcomes of these increased pressures in its Global Corporate Real Estate Trends report, which details the top five risks and rewards corporate real estate users are facing in 2013:

•   Singular focus on real estate cost cutting undermines potential rewards from revenue-enhancing investments
•    Procurement drives price- rather than value-driven outsourcing partnerships
•    Workplace productivity is frequently miscalculated in cost-per-square-foot terms, when contribution to business performance better characterizes returns
• Collaboration with HR, IT and finance is a must for enhancing workplaces, yet silos continue to constrain joint efforts
• Compromising real estate quality to enter high-growth global markets is dangerous

 Singular focus on real estate cost cutting undermines potential rewards from revenue-enhancing investments

Investments in long-term real estate and workplace strategies are many times rewarded with significant contributions to productivity and corporate performance; however, the increasing pressures on real estate teams to implement short-term cost cutting continues to undercut more strategic moves. Real estate can continue to add productivity value when cost-cutting measures have run their course – but that typically requires investment, and the resulting corporate resistance to capital expenditure is a difficult barrier to hurdle.  JLL’s survey reveals that 48 percent of corporate executives view financial constraints as their greatest limitation to adding more strategic value to their businesses, while 34 percent also cite lack of effective data and analytics (see Figure 1).  Many lack the tools and training to effectively identify, shape and execute the broader business strategies that would ultimately deliver the most business impact. Corporations need to recalibrate their real estate functions away from tactical cuts and into strategic investments.

 Figure 1: Constraints hindering corporate real estate from enhancing its strategic position. Source:  JLL 2013 Global Corporate Real Estate Trends

Procurement drives price- rather than value-driven outsourcing partnerships

Corporate real estate outsourcing is developing rapidly, and its reward can be significant contributions to real estate productivity, innovation and efficiency. In fact, 92 percent of companies surveyed in JLL’s report are practicing some form of real estate outsourcing. With this rise comes increased participation from the procurement function in the choice of outsourced service providers, with 68 percent citing active involvement. Yet, 58 percent report that procurement, when involved, has a limited knowledge of real estate and its complexity and could overlook these characteristics in a price-driven procurement process.

 Workplace productivity is frequently miscalculated in cost-per-square-foot terms, when contribution to business performance better characterizes returns

Many corporate real estate footprints are shrinking. However, achieving greater density is not the same as achieving productivity, which 96 percent of respondents are charged with doing. According to JLL’s report, this unwieldy corporate expectation is prevalent as 72 percent of companies now expect real estate to drive workplace productivity. Additionally, 61 percent look for people productivity, 57 percent demand business productivity and 47 percent cite asset performance as a key value driver for the company (Figure 2).

Figure 2: Company expectations on productivity outcomes expected from corporate real estate. Source:  JLL 2013 Global Corporate Real Estate Trends

 Corporate real estate is more about people than property, and workplace strategy should be centered on how to use property to make employees more productive. The good news is that 67 percent maintain that they’re making strides as the quality of their workplace has improved during the last three years, demonstrating a focus on quality over pure space utilization metrics. At the same time, this quality has been achieved alongside efficiency, with 68 percent suggesting that the utilization of space has also improved. Metrics that will help to mitigate this risk include calculating new workplace environments and the achievement of business goals, sales increases that follow real estate strategy execution or other performance metrics that directly or indirectly link environmental improvements, relocations or capital investments to business outcomes.

Collaboration with HR, IT and finance is a must for enhancing workplaces, yet silos continue to constrain joint efforts

Achieving the reward of true workplace transformation requires collaboration, changing management styles and true cross-functional alignment. Formal collaborative organizational structures, such as administration or shared service centers, are likely to increase as workplace productivity increases in importance as a strategic focus. This change presents an opportunity for corporate real estate teams to play a leadership role with partners in HR, IT and finance, and that collaboration trend is forecasted to shift corporate real estate into an integrated shared service in the next three years. While only eight percent of respondents indicated that their function is currently contained within a cross-functional group, 51 percent identify with the model of shared services integration with finance. The reward for such leadership can be improved worker, workplace and real estate portfolio productivity.

 Compromising real estate quality to enter high-growth global markets is dangerous

Portfolio growth is predicted to be strongest in the world’s emerging real estate markets that also tend to operate fundamentally differently than mature markets well-known to the executive suite.  Many of the emerging markets with the highest growth potential operate with less transparency compared to mature markets, so the process of securing space requires a culturally sensitive approach and local empowerment in order to seize opportunities that best support business growth.

Nearly one in five respondents recognizes that the greatest challenge facing corporate real estate executives is the risk of not being able to support business expansion in high-growth, low-transparency markets. The possibility of missed expectations is high and failure to deliver can damage the company’s reputation and standing of its real estate team.

“Companies that secure the right real estate in low-transparency, high-growth markets will be well-positioned to take advantage of global economic expansion where it is the strongest,” says Dr. Lee Elliott, JLL’s Research Director for the firm’s EMEA region, who further adds, “Our research indicates that the time and resources invested in fully understanding the local real estate dynamics in those markets carries the potential to achieve significant corporate returns. Corporate real estate teams must educate their business leaders about the practicalities of building platforms in emerging markets if their reputations are ultimately to be maintained or enhanced.”

Jones Lang LaSalle to Launch Second Indian Property Fund

Global property consultant Jones Lang LaSalle is planning the launch of a second property fund in India, according to a media report.

After launching its maiden Rs 300-crore private equity fund in India focused on residential properties late last year, Jones Lang LaSalle (JLL) is now considering a second one in its Segregated Funds Group – a new investment vehicle created to invest in India's property market which has been hit hard by the country's slowing economic growth and the global financial crisis, a Business Standard report suggested.

According to inside sources, the new Rs 1,200 crore (£173.2 million) property fund will be launched by the end of 2013 and will focus on office properties.

The newspaper quoted one of these sources as saying: “The fund will focus on corporate real estate and target higher returns […].” Jones Lang LaSalle is also studying opportunities for launching property funds in retail and hospitality sectors, the source added.

Besides US-based Jones Lang LaSalle other major international property advisers have also launched or are in the process of launching India-focused property funds. UK-based Knight Frank has set up a rental yield fund with Bangalore-based Anand Rathi Financial Services, and was planning to launch a second realty fund last year. US-based CBRE Group was also looking at a third party domestic fund to invest in Indian properties.

The Economic Times reported last month that Jones Lang LaSalle will be making its first real estate investment from its first India-focused fund in Bangalore – a move indicating a cautious return of risk capital to the country's beleaguered property market. The company will look to invest about Rs 30 crore in city-centric luxury residential projects, the newspaper said, citing information obtained from an inside source.

"JLL has identified three to four sites in Bangalore, and is currently in the final stage of discussions with two real estate developers to develop the project. They are bundling four sites onto a single platform to develop a luxury housing project", the source said, adding, "Jones Lang LaSalle is betting big on the Indian residential real estate market, and Bangalore's eco-system is being seen as one of the best for private equity in India.”

Luxury housing projects worth nearly $2 billion in total were launched across India last year, at a time when the overall housing segment continued to slow down, the report pointed out.

Commercial demand drives Mumbai hospitality sector

As Mumbai is the commercial capital of India, the nature of lodging demand tends to be dominated by commercial demand, which contributes close to 75-80% of the city’s overall lodging needs with the remaining coming from a mix of leisure (5-10%) and MICE (10-15%).

The mushrooming of Indian economy in the past decade along with healthy growth in the number of both domestic as well as international passenger arrivals are some of the reasons that have given a boost to the progression of the city’s hospitality industry

Commercial real estate development has played a pivotal role in shaping Mumbai’s lodging markets, according to Jones Lang LaSalle. “Mumbai leads all metropolitan cities in India with a total Grade A office stock of 7.9 million square meters as of December 31, 2012. The city has witnessed a Compounded Annual Growth Rate (CAGR) of 21.7% over the last five years in terms of incremental office stock,” says Sudeep Jain, Executive VP – Jones Lang LaSalle Hotels (India).

MICE demand is typically generated from a number of large conventions organised in Mumbai, and in the form of smaller meetings and conferences held by local companies. Some of the major events to be organised in Mumbai during 2013 include

ChemPetro World Expo, Pharma World Expo, Plastivision India and India Steel Event. Additionally, Mumbai’s importance as the financial capital of the country results in a large number of events, related to financial, economic affairs and trade, being organised in the city.

Leisure

Due to the city’s predominantly commercial profile, the leisure segment contributes a relatively smaller percentage of room demand. For foreign tourists, Mumbai serves mainly as an entry

point into India for connectivity to other destinations in Maharashtra and other parts of India. Demand from the leisure segment is mostly concentrated around the South Mumbai area.

Based on JLL research, Mumbai has 45 operational hotels, with an inventory of 10,537 rooms spread across six categories. Prominent operators with a presence in Mumbai include Hyatt, Marriott, IHG, Starwood, Four Seasons, East India Hotels (Oberoi & Trident) and Indian Hotels Company Ltd. (Taj).

Luxury and upper upscale hotels dominate the total supply with 69% contribution to the overall inventory. The upscale segment contributes 14% followed by the midscale segment with an 8% contribution. Domestic and internationally branded economy and budget hotels in Mumbai currently represent 5% of the total supply. Serviced apartments in Mumbai are presently offered by four properties in the branded segment, namely Marriott, Oakwood, Grand Hyatt and Taj, collectively contributing 4% of the total inventory.

There are 13 hotels currently under construction in Mumbai across different categories with a total inventory of 3,394 rooms. Once operational, the total room inventory of Mumbai will go up by almost 32% from the existing supply. Some of the prominent international operators like Jumeirah and MGM have also announced their plans to enter Mumbai’s hospitality space in the coming future.

MIAL boosts the demand

MIAL, a joint venture between GVK led consortium and Airports Authority of India was awarded a mandate to modernise and upgrade Mumbai’s CSIA. Apart from the expansion of existing airport and development of a new terminal, MIAL will also auction land parcels on lease for commercial and hotel development. The auction process is expected to start during the second half of 2013. This move is expected to further augment the hotel supply in the city.

Lodging Market Performance

Over the three year period from 2009-10 through to 2011-12, Mumbai witnessed a marginal increase of 4% in Revenue per Available Room (RevPAR) as a result of a 1% increase in occupancy levels accompanied by a 2% growth in Average Daily Rate (ADR).

FY 2010-11 saw an increase of about 2.5% in occupancy and 5% in ADR after witnessing a steep decline from 2007-08 to 2009-10 due to global economic turmoil and the terrorist attacks at two

prominent hotels in Mumbai. In 2010-11 occupancy levels averaged at 63% and ADR at around INR 9,500. Hotels in South Mumbai have been the worst affected in terms of performance post terrorist

strikes at Trident and Taj Mahal Hotels followed by a bomb blast at Zaveri Bazaar in 2011.

Furthermore, the corporate movement from traditional CBD to Central and North Mumbai, due to availability of office stock at cheaper rentals, has also affected hotels in South Mumbai adversely.

Trading performance has seen a drop of 2% in RevPAR during the last 11 months, in comparison to 2011-12, in the light of a decline of 8% in ADR to INR 8,450. Occupancy on the other hand strengthened to 64% during YTD 2012-13 from 60% in the previous year.

Overall, the Mumbai lodging market has seen fairly stable demand levels over the past four years, along with a decline in average rates, primarily due to recent regular supply additions in the form of Shangri-La, Sofitel and Ibis.