28 November 2016

CONTINUED SUPPLY CRUNCH DISTRESSING THE PUNE OFFICE OCCUPIERS

News

Quality Grade A supply has been a scarce commodity in the Pune real estate market for a long time. Q4 2014 witnessed 2.8 million sq ft of new supply infusion. However, since then new supply addition to the office inventory has been on a downward spiral with numbers dwindling to a mere 1,000 sq ft. With about 4.5 million sq ft of available supply, the vacancy levels have declined to single digits in most of the preferred micro markets. However, new stock addition should fill supply demand gaps in Pune office markets with a few notable completions such as World Trade Center - Block D by 2017 and EON Phase 2 by 2018. DLF IT SEZ Block 5 at Hinjewadi Phase II is also scheduled for completion, tentatively by the end of 2017. Most of this new supply would be concentrated in micro markets such as Hinjewadi, Kharadi, Hadapsar and Airport Road.

Office Services View

Lack of quality supply, non-availability of contiguous floors and increasing rentals is a key challenge for Pune to remain competitive compared to its peers like Hyderabad and Bengaluru, especially for technology sector occupiers in the medium to long term.

Research view

In Q2 2016, year-on-year (YOY) change in rental values at locations such as Kharadi, Hadapsar, Fursungi and Senapati Bapat Road was recorded between 22-25%. The upward trend in rents can be primarily attributed to limited availability of quality office stock. Companies are switching to Grade B establishments to fulfil their immediate office space requirements. Although, the rents stabilised momentarily in Q3 2016, this trend is likely to continue for a few subsequent quarters as most of the under-construction buildings are scheduled to see completion only by the end of 2017.

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