Office absorption in Pune gains momentum; 1 million sq. ft. leased from July to Oct 2020: JLL

Sanjay Bajaj,

Pune’s office market is gradually picking up with approximately 1 million sq. ft. of gross office space being absorbed during July to October 2020. This is in comparison to a 1 million sq. ft. absorption in the first half of 2020 (January to June).

While absorption was sluggish in H1 2020 owing to the lockdown, 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 2020. As a result, the first ten months of the year witnessed approximately 2 million sq. ft. of gross absorption. The leasing has been primarily led by BFSI & Fintech, GICs, Indian and Global Technology Services Firms, Product companies and Flex/coworking space Operators. Additionally, Pune is also getting recognised as a start-up and R&D hub.

“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 favourite among occupiers, developers and investors,” said Sanjay Bajaj, Managing Director – Pune, JLL. “Pune is among the fastest-growing flex space in the country today,” he added.

Absorption trends 2020 (million sq. ft.)  

Q1 2020 Q2 2020 Q3 2020 Oct 2020
0.36 0.64 0.46 0.64

Source: Real Estate Intelligence Services (REIS), 2020, JLL Research & JLL Pune Markets

 Vacancy trends 2020 (%)

Q1 2020 Q2 2020 Q3 2020
5.5 4.4 4.7

 Source: Real Estate Intelligence Services (REIS), 2020, JLL Research

 Estimated new supply in 2021 (million sq. ft.)  

Q1 2021 Q2 2021 Q3 2021 Q4 2021
0.45 3.2 1.52 1.58

  Source: JLL Pune Markets

 Average vacancy in the city during the last three quarters remained range bound and stands at 4.7% by end of Q3 2020. Approximately 7 million sq ft. of new supply is scheduled for completion by the end of 2021.

The rental plateau

The rentals are plateauing in Pune offering value-driven propositions and opportunities to occupiers. Moreover, the landlords across the city have 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.

 New investments

The city has been attracting large institutional funds and developers. Approximately 47% of the city’s Grade A stock is directly or indirectly under the ambit of institutional funds or developers. These investments are spread across greenfield, brownfield, rent-yielding ready assets’ and an additional 25.0 million sq. ft. is projected to be added in the next 5 years.