Pune office absorption gains momentum; July-Oct leasing tops 1 million sq ft
The market has witnessed absorption of over 1 million sq ft during July to October. This is in comparison to a 1 million sq ft absorption in the first half of the year until June, showed data from JLL India.
MUMBAI: Commercial real estate activity in Pune, one of the key information technology and IT-enabled service hubs in the country, has started picking up after witnessing sluggish activity during the lockdown and the ongoing Covid-19 disruption.
The market has recorded absorption of over 1 million sq ft during July to October compared to a 1 million sq ft absorption in the first half of the year until June, showed data from JLL India.
The city witnessed large corporate occupiers renewing their existing office leases as a part of their long term corporate real estate strategies during July to October.
The leasing has been primarily led by financial services and insurance, fintech, Indian and global technology services firms, and co-working space operators.
“Most sectors continue to expand their footprint in the city owing to the diverse and quality talent base, large world class campuses offering competitive rents and the city’s vibrant and cosmopolitan lifestyle. Due to these factors, Pune remains a favorite among occupiers, developers and investors. The deal pipeline for 2021 looks strong,” said Sanjay Bajaj, Managing Director - Pune, JLL.
Average vacancy in Pune during the last three quarters remained range bound and stands at 4.7%--one of the lowest in the country, at the end of third quarter.
Around 7 million sq ft of new supply is scheduled for completion by the end of 2021.
“The initial part of the financial year saw occupiers focusing on business continuity and seamless delivery of services for their global clients, following a cautious approach to committing to larger areas, although, there have been small spurts of demand from multinationals seeking spaces for their immediate needs,” said Vinod Rohira, CEO, Mindspace Business Parks REIT.
According to him, the reduced supply of grade A offices, sub dollar rentals, skilled human capital, increased preference for high quality and safe office spaces, has augured well for key developers like Mindspace, in several markets, including Pune.
Among key transactions in October, global alternative legal services provider DWF Mindcrest leased over 280,000 sq ft of office space at Mindspace Business Parks REIT in Pune‘s Kharadi locality, while flexible office space operator Simpliwork Offices also inked a long-term lease for 230,000 sq ft office space at Sky One Corporate Park in Pune.
The rentals are plateauing in the Pune market offering value driven propositions and opportunities to occupiers.
Moreover, the landlords across the city are more flexible now and open to innovative deal structuring, including incurring capital expenditure towards fit outs on behalf of occupiers. These factors are helping occupiers achieve a more cost-effective cash outflow.
Pune has been attracting large institutional funds and developers as nearly 47% of the city’s grade A office stock is directly or indirectly under the ambit of institutional funds or developers. And an additional 25 million sq. ft. is projected to be added in the next five years.