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January 26, 2011

Increased Plan allocation for city & core push likely to boost real estate prices

The Real estate market in the City Beautiful is witnessing a revival, at least in the commercial space. Chandigarh, known to be one of the top test markets for retailers across India, had seen rentals in prime retail area — Sector 17 — in the heart of the city, fall by more than 60%.

Rentals dropped from Rs 800 per sq ft a year back to around Rs 250-350 per sq ft currently. The global slowdown had an equal impact on Chandigarh as it had in other metros in the country in terms of correction in rentals.

Large retailers such as Cantabil, Provogue, Annie Smith, Ethnic India have vacated showrooms as business was becoming unviable. Traders Association of Chandigarh general secretary JPS Kalra told ET: “More than 15 brands are about to shift from the piazza area here.” But smaller players expanded their retail footprint in locations that were earlier being rented out a very high prices. Venus Garments, makers of the UV&W apparel brand, has signed up for a 1,000 sq ft (super area) property at Centre Mall in the southern side of Chandigarh on 15% revenue sharing basis.

But real estate consultants Jones Lang LaSalle Meghraj (JLLM) says the present scenario looks more promising. “Fence-sitters are now looking at Sector 17 again, but they are cautious. The priority is viability and not competition like it was around a year or two back when companies were pushing themselves to expand,” says JLLM regional director Manoj Kashyap.

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Ground floor rates in Sector 17 could touch a maximum of Rs 350 per sq ft and the first floor rates get lowered to Rs 300 per sq ft. Another prime area — Sector 35 — has a mix of space for food retailers and prices are only marginally lower than Sector 17. The likes of KFC, McDonalds, CCD and Barista have taken up large spaces in this sector where rentals have seen a slight drop. But there have been exits as well such as Costa Coffee which closed down its “unviable” outlet here. Retail rentals in the southern sectors, which have smaller showroom sizes, have dropped from Rs 60-65 per sq ft that was being offered a year or two back to Rs 45-50 per sq ft. This non-prime area, comprising sectors beyond Sector 35, has reasonable rentals but the small size of showrooms and the city administration not allowing conjoined showrooms has thwarted large retailers to set up shop.

Demand for office space is, however, stagnant and price per sq ft has also come down from Rs 75-80 to Rs 35-40 in Sector 17. for which the government had ambitious plans of making into a financial hub, has also seen a correction of 15-20%. Prices that were earlier touching Rs 45-50 per sq ft are now in the range of Rs 25-30 per sq ft. The industrial park at the eastern end of the city, land use guidelines for which were changed from industrial to commercial by the government, has made new commercial space available. Asking rates for it are going at Rs 45-50 per sq ft but demand is still not giving sales the much required stimulus.

The highlight for Chandigarh has and perhaps will always beprices for which range between Rs 2.5 crore per kanal (4500 sq ft) to Rs 3 cr, across the city. The northern Sectors of 7, 8, 9, 10 and 11 that have bungalows and larger houses are on the higher side of the price spectrum while the southern sectors belong to the lower end, due to a large concentration of flats and apartments. Sectors such as 15, 16, 18 and 19 fall in the midsegment where prices can touch Rs 2.75 cr per kanal. The Union Budget announced an increase in Plan allocation of the city, which would be used for infrastructure projects such as the proposed Metro. This could perhaps give the required push to real estate in the city, especially on the retail front.

Courtesy:- ET dt:- 12-07-09

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I am sapna kashyap.i working Bhardwaj Buildtech Pvt.Ltd compani

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