On The Rise
by Mr. Ashutosh Limaye,
JLL India
After
years of stable rental growth thanks to the y-o-y supply-demand ratio
remaining almost at par, Pune has seen a rapid growth in office rents
over the last four-six quarters.
This is due to absorption having increased during the same time period
while Grade-A supply remained subdued. Interestingly, this rise in
rentals is across Grade-A and B buildings. Project-specific rents also
increased significantly higher than the market
average during the period.
|
Parameters
|
Last 3 Years – Grade-A supply (from 3Q12 to 3Q15)
|
|
Supply
|
10.5 million
sq ft
|
|
Absorption
|
12.6 million
sq ft
|
|
Demand Supply difference (Grade A)
|
Approx 2 million
sq ft
|
The
annual rental growth witnessed in Grade-A projects is to the tune of
10-13%. Securing space in the form of pre-commitment has been an
increasing trend in Pune due to the
limited vacant space in completed Grade-A projects. The limited
availability and comparatively higher rents in Grade-A projects has
given rise to a trend of tenants securing space in built-to-suit (BTS)
properties or opting for Grade-B properties in Pune.
 |
| Ashutosh Limaye, JLL India |
The
overall vacancy in Pune has reduced from 16% in 2011 to 5% in 2015. The
absorption in Grade-B buildings has increased significantly in the last
four-six quarters. Not only
the demand by IT/ ITeS players, which has shown robust growth over the
years, but also demand by BFSI players is rising in the city. However,
corporate occupiers actively evaluating Grade-B options often face
issues like lack of larger floor-plates, amenities,
good locations and connectivity.
|
Pune office
|
Overall
|
CBD
|
SBD
|
PBD (suburbs)
|
|
Vacancy
(as of 3Q15) |
5%
|
4.5%
|
3%
|
11%
|
What actually happened?
A
few years ago, when IT office supply increased, developers imagined a
possible situation of oversupply in the market – if new supply kept
entering the market at that rate.
Anticipating such a scenario, a few players de-notified their special
economic zones (SEZs) or converted their commercial development plans
into residential ones. At that time, residential realty looked like the
safest bet. The demand was, however, misinterpreted
and has continued unabated unlike what developers had expected.
The way forward
Rents
are being revised upwards by developers given this situation. On the
back of continued demand, office rents will keep increasing across the
city until enough fresh supply
becomes available. It is high time more IT/ ITeS supply was bought in.
On the back of a positive business sentiment, select IT/ ITeS occupiers
have expansion plans. Some may go ahead with constructing BTS
facilities. Others are likely to lease space in IT
and IT-SEZ office buildings.
Demand
in 2015-2016 will primarily be driven by companies in the IT/ ITeS and
banking, financial services and insurance (BFSI) sectors. The
contribution of BFSI to the total
absorption has shown continuous improvement in the past few quarters
and there will be need for office spaces for these companies too.
About the author..
Mr. Ashutosh Limaye, National Director – Research, JLL India
For media Contact
Arun Chitnis
Head – Corporate
Communications & Media Relations
JLL India
Pune 411001.
Tel: (020)
30930441 Fax: (020) 40196101
Mob: +91
9657129999
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