Pune office market snapshot 2013 report

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HIGHLIGHTS

• Demand for office space in the Pune office market proved to be resilient, with increased commercial leasing recorded at around 3.5 MN SF, 11% up from 2012.

• The office leasing activities in 2013 were dominated by the IT/ITeS sector with approximately 70% of the total absorption from this sector, followed by BFSI.

• Average rental values registered an increase of 5% Year-on-Year (YoY)

• The outlook for 2014 is promising in terms of the office market. IT/ITeS will continue to play an important role in the city’s overall commercial office space absorption.

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Pune office market snapshot 2013 report

  1. 1. Pune Office Market Snapshot 2013
  2. 2. Pune Office Market Snapshot 2013 Quarter-on-Quarter Absorption Highlights 1.6 1.40 1.4 1.2 IN MN SF In 2013, despite an uncertain global economic environment, demand for office space in the Pune office market proved to be resilient, with increased commercial leasing recorded at around 3.5 MN SF, 11% up from 2012. The office leasing activities in 2013 were dominated by the IT/ITeS sector with approximately 70% of the total absorption from this sector, followed by BFSI. Amidst the weak economic scenario, the year saw a number of companies such as AXA, Barclays, Cummins, Deutsche Bank, NVIDIA, Symantec, Symphony Teleca, Synechron and others, lease and purchase significant office space (100,000 SF to 700,000 SF) across Pune, either for office expansion or consolidation. AVERAGE ABSORPTION 1.0 0.84 0.83 3Q 4Q 0.8 0.6 0.40 0.4 0.2 0.0 1Q 2Q Industry Wise Absorption Demand Large IT/ITeS occupiers were focusing on consolidation or expansion with the objective of keeping costs under control. Occupiers preferred locations such as Kharadi, Yerwada, Hadapsar and Phursungi in the east and Hinjewadi in the west due to the availability of premium office space. The market has also witnessed increased traction from retail investors. Individual investors as well as small and medium enterprises were aggressively looking for investments in small Grade A offices. Others 12% Pharmaceutical 4% 2 BFSI 15% 1 IT/ITeS 69% Top 10 Transactions of the Year Client Developer / Landlord Cummins Panchshil Tech Park Panchshil Realty 1,184,000 Balewadi 4Q Synechron Block 1 Ascendas 600,000 Hinjewadi 1Q Deutsche Bank Business Bay Panchshil Realty 300,000 Yerwada 3Q Nvidia Commerzone K Raheja Corp. 250,000 Yerwada 1Q Symantec EON Free Zone Panchshil Realty 178,000 Kharadi 4Q Symphony Teleca Corp. India Indo Global IT Park Wadhwa Developer 148,000 Hinjewadi 4Q Axa Marvel Edge Marvel Group 120,000 Viman Nagar 1Q Praj Industries Praj Tower Vascon Engineers Ltd 111,000 Hinjewadi 1Q Barclays EON Free Zone Panchshil Realty 100,000 Kharadi 3Q Siemens 1 Building Name Embassy Tech Park Embassy Group 84,000 Hinjewadi 1Q Pune Office Market Snapshot 2013 | Colliers International Area (In SF) Location Transaction Quarter
  3. 3. Supply & Vacancy Complementing the demand, approximately 3.75 MN SF of new supply was added to the Pune office market. Most of this supply was concentrated in SBD micro-markets such as Yerwada, Baner and Viman Nagar and in PBD micro-markets like Kharadi and Hinjewadi. The overall vacancy rates remained unaltered during the year at approximately 23% However, there is very limited space available in Special Economic Zones (SEZs). Due to high vacancy levels in the market, developers continued to refrain from launching new projects this year. However, due to high demand in SEZs, developers such as Paranjape and Panchshil have launched the second phase of their existing SEZ, Blue Ridge located at Hinjewadi and EON in Kharadi, respectively. New Supply, Absorption & Vacancy 6 30% FORECAST 5 4 20% 3 15% 2 10% 1 5% 0 2010 Rental & Capital Values 2011 2012 New Supply (In MN SF) During the year, average rental values registered an increase of 5% Year-on-Year (YoY). The influx of new supply with rents relatively higher than the market average led to an increase in weighted average rents. Capital values this year increased 8% YoY across all micro-markets due to increased investor interest. 2014 Prognosis 25% 2013 2014 F Absorption (In MN SF) 2015 F 0 Vacancy (In %) Average Rental Trends & Forecast 60 FORECAST 50 The outlook for 2014 is promising in terms of the office market. Corporates will continue to remain cost cautious in their expansion decisions. Demand will remain upbeat in SEZs. Meanwhile, IT/ITeS will continue to play an important role in the city’s overall commercial office space absorption, primarily attributed to the projects that have already seen pre-commitments or long-established interest from various IT/ITeS companies. On the supply front, including deferred projects, the new stock expected in 2014 will be approximately 4 MN SF Most of this supply will be located in suburban and peripheral micromarkets. Controlled supply in tandem with absorption will keep vacancy levels unaltered. East and west Pune micro-markets will continue to interest occupiers due to availability of large floor plates, better infrastructure and proximity to residential pockets of the city. 2 Pune Office Market Snapshot 2013 | Colliers International 40 30 20 10 0 2008 2009 2010 2011 2012 2013 2014 F Average Rental Trends (INR Per SF Per Month) 2015 F
  4. 4. Primary Authors: 62 countries on 6 continents United States: 140 Canada: 42 Latin America: 20 195 EMEA: 85 $2 Surabhi Arora Associate Director | Research +91 124 456 7500 surabhi.arora@colliers.com Amit Oberoi National Director I Valuation & Advisory Services & Research Sachin Sharma Assistant Manager I Research For Office Services: George McKay South Asia Director I Office & Integrated Services george.mckay@colliers.com billion in annual revenue Vikas Kalia National Director I Office Services vikas.kalia@colliers.com 1.12 Rishav Vij General Manager I Office Services rishav.vij@colliers.com 13,500 Technopolis Building, 1st Floor, DLF Golf Course Road, Sector 54, Gurgaon - 122 002 TEL +91 124 456 7500 billion square feet under management professionals About Colliers International Colliers International is a global leader in commercial real estate services, with over 13,500 Corporation, Colliers International delivers a full range of services to real estate users, owners and investors worldwide, including global corporate solutions, brokerage, property and asset management, hotel investment sales and consulting, valuation, consulting and appraisal services, colliers.com Copyright © 2014 Colliers International. ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

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