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DLF targeting rental portfolio of 40 mn sq ft by 2022

Real estate major looking at a 15.2 percent per annum from both existing portfolio and new construction

With the commercial real estate market gradually looking up, DLF Ltd has plans to ramp up its commercial and retail rental portfolio to around 40 million sq ft by 2022. It is also looking at exploring the Mumbai and Bengaluru markets for commercial and perhaps retail in the future, says a senior company official.

“Our rental portfolio is currently about 32 million sq ft which includes retail of 4 million sq ft and 28 million of office space. This will grow by 6 to 8 million sq ft by 2022. Our total rental portfolio will be about 40 million sq ft by 2022,” says Sriram Khattar, managing director, Rental Business, DLF.

“Our philosophy is that nationally we will do approximately 2.5 million sq ft to 3 million sq ft of development / construction every year,” he says

In December 2017, DLF concluded the sale of 33.34 per cent stake in its rental arm to GIC for around Rs 8,900 crore. The money was used to reduce its debt.

In the next three to four years, the two markets that the company may explore are Mumbai and Bengaluru for commercial and perhaps retail, he says.

Rental portfolio in Gurugram

The realty major is developing a commercial project in Gurgaon and has recently bought about a 12 acre land parcel in the city for Rs 1,500 crore from Haryana State Industrial and Infrastructure Development Corporation (HSIIDC).

“We are planning to develop close to 2.5 million sq ft on this plot. It is still in the planning stage and we have not decided on the launch date yet. We hope to take a decision by September on what to do here and when to launch the project. It is a commercial plot, so there is flexibility in its usage,” he says.

The realty major’s iconic Cyber Park project spread across 2.5 million sq ft is expected to be ready for handover for fit outs by year end and should be fully operational by March-April 2019.

Chennai portfolio

The company has expansion plans for its Chennai SEZ property. The expansion of Cyber City Chennai will be in three phases.

The first block of 0.47 million sq ft is operational. “Another block of 0.42 million sq ft will be ready for fit outs by early next month. It is in the last stages of getting its final clearances. This will take the IT Park to about 6 million sq ft,” he says.

The third block is about 0.47 million sq ft for which the construction has commenced. A retail promenade makes for another 0.15 to 0.20 million sq ft.

“Once completed, this 5.8 million sq ft of existing commercial space will increase by 1.4 million sq ft, enhancing our portfolio to 7.2 million sq ft by end of next year or early 2020,” he says.

The company has another commercial property of about a million sq ft in the Guindy area for which planning is currently on. Another SEZ plot spread across 26 acres located in Taramani area is in the planning stage.

Hyderabad portfolio

The IT Park in Cyber City is spread across 3 million sq ft. This has been completed and rented out. “We have the potential to develop another 2.7 million which is still in the planning stage,” he says.

Retail portfolio to touch 5 million sq ft by 2022

The company’s retail segment is expected to touch 5 million sq ft by 2022. The company is planning two new retail projects – one in Goa and the other in Gurugram.

Market sources say that the Goa mall located in Patto Plaza, Panjim is a million sq ft development out which the mall is roughly about 0.6 to 0.7 million sq ft. The remaining area has been planned as commercial, service apartments and hospitality, being the least. “The planning is ongoing and construction is likely to begin by end of the year,” he says.

Co-working spaces exposure to increase to about 700,000 sq ft in near future

DLF recently leased out about 2.70 lakh sq ft of office space in Gurgaon to US-based co-working major WeWork. The company had earlier provided around 75,000 sq ft office space on lease to another co-working operator Skootr.

“We have done 270,000 sq ft with WeWork and 75,000 sq ft with Skootr. Our total exposure in the segment is approximately 550,000 sq ft which we expect to go up to around 700,000 sq ft in the near future,” says Khattar.

Even some of the business centres are co-working spaces. They have a little more value add and cost a little more. When we take our portfolio we include them as well as the product is similar. Value proposition being differentiated, he explains.

“We have studied the model very closely and we believe that demand in this space will grow. We believe that in the Indian context co-working space is a good business model because it helps entrepreneurs and SMEs businesses to have proper office environment to work in rather than work out of small makeshift offices in residential areas. It is also a good opportunity for the larger companies to take care of their swing space requirements,” he says.

Renewals of rental lease amounts to 6 to 7 million sq ft per annum

The average lease cycle for DLF is 9 to 10 years for offices and 5 to 9 years for retail, explains Khattar.

“Our renewal rate in offices is in excess of 90 per cent, tenants who leave are those making their own campuses or offices.”

Vandana Ramnani
Vandana Ramnani
first published: Jul 2, 2018 02:59 pm