Pune to witness 4.0 mn sq.ft. office leasing space in 2022: Savills India report

February 9, 2022: Pune is likely to clock in Grade-A gross absorption of around 4.0 mn sq. ft. driven by pre-commitments of 1.4 mn sq. ft. that are likely to get absorbed during the year 2022. The office market in the city is expected to show signs of recovery during 2022, according to International real estate advisory firm Savills India.

Outlook for Pune office market

• Savills India expects 2022 to clock in Grade-A gross absorption of around 4.0 mn sq. ft.
• There will be continued interest and office leasing demand from technology occupiers,  flexible workspace operators, engineering and manufacturing occupiers
• Micro-markets of SBD East and SBD West are likely to attract occupier attention due to expected infusion of quality supply offering large contiguous spaces
• Grade-A quoted rental values are likely to remain stable across all micro-markets. Vacancy rate to hover around 16%-17% at the end of December 2022
• New supply of 6.7 mn sq. ft. is scheduled to be completed during 2022. This planned supply will likely be concentrated in the micro-markets of SBD East (38%) and SBD West (30%) in the form of IT developments

Key Highlights of 2021 for Pune office market

• Pune witnessed Grade-A gross absorption of 2.9 mn sq.ft.
• The city witnessed 1.2 mn sq. ft. of pre-commitments driven by technology occupiers and flexible workspace operators mainly in the micro-markets of SBD East, SBD West and the CBD
• Majority (37%) of Grade-A gross absorption was concentrated in the micro-market of SBD East, followed by 34% in SBD West, 20% in the CBD and the remaining in PBD West
• Occupiers gained confidence in the market during H2 2021. The absorption was split as 33:67 between H1 and H2 2021
• Technology occupiers continued to dominate the leasing activity, accounting for 53% share in Grade-A gross absorption, followed by flexible workspace operators accounting for 37% share, this was almost double the absorption recorded during 2020, when the segment accounted for a 15% share in overall leasing
• Pune witnessed Grade-A supply infusion of 3.1 mn sq. ft. All the new supply was concentrated in the micro-markets of SBD East and West, with an 80:20 split between IT and non-IT developments
• Overall vacancy levels in the city rose to 12.1% at the end of 2021. The increase in vacancy can be attributed to considerable relocations by occupiers as well as surrendering of spaces amidst tough market conditions
• Citywide Grade-A quoted rental values remained stable at INR 74/sq. ft./month at the end of December 2021

Praveen Apte, MD, Pune, Savills India said, “The office market in Pune is expected to witness growth with sectoral and locational diversity. Newer upcoming locations will facilitate advantages that an occupier desires with respect to talent acquisition. Pune will witness increased traction from Tech & R&D companies. Flex offices will continue to attract occupiers. Increased interest from institutional developers will only enhance the quantum & quality of world class office facilities.”