Pune Office Market Trends to watch for in 2015

1. 1 Research & Forecast Report | January 2015 | Colliers International
Another Silicon
Valley in the
making
The Pune market remained robust in 2014, with office
take-up rising by 41%, to 4.91 million sq ft. The strength of
demand from the IT/ITeS sector (85%), together with BFSI
and Engineering, contributed to this increase. The city has
continually increased its share in overall absorption in the
last three years by seizing Mumbai IT/ITeS demand. The
availability of Grade A office space, especially in special
economic zones with affordable rentals and proximity to
the financial capital, has attracted many IT/ITeS companies
to consider this location as an alternative to Mumbai.
Locations in the west, such as Viman Nagar, Yerwada,
Station Road and Hinjewadi, witnessed the maximum
number of transactions with 45% share of total market
absorption, followed by CBD with 14% and Hadapsar/
Phursungi with 12%. Among the renowned deals this year,
HSBC took 0.50 million sq ft in Panchshil Business Bay at
Yerwada, BMC took 0.25 million sq ft in Yerwada. While,
Accenture India leased 0.2 million sq ft and pre-committed
another 0.8 million sq ft in SP Infocity SEZ. A side from the
foregoing, this city also garnered interest from large private
equity players such as Black Stone, which bought Blue Ridge
SEZ in Pune from fund manager IDFC.
Accompanying the demand, approximately 2.8 million
sq ft of new supply was added to the Pune office market.
However, this is less than last year’s new supply of around
3.5 million sq ft Most of this supply was concentrated in
SBD micromarkets, such as Viman Nagar, Yerwada and
Hadapsar.
Overall vacancy rate decline marginally during the year at
approximately 21.5%. The total vacant stock as of December
2014 was about 4.9 million sq ft. Approximately 9 million
sq ft is expected to hit the market in the next three years,
City Office Barometer
Research &
Forecast Report
Pune | Office
January 2015
Rental Values
*Indicative Grade A rents in INR per sq ft per month
MICRO MARKETS
RENTAL
VALUE*
% CHANGE
QoQ YoY
Baner 45 - 55 0% 0%
Bund Garden 50 - 65 0% 0%
Airport road/pune
station
45 - 75 0% 13%
Aundh 45 - 60 0% 0%
Senapati Bapat
Road
55 - 85 0% 0%
Bavdhan 35 - 45 0% 0%
Kalyani Nagar 45 - 60 0% 0%
Nagar Road 40 - 60 0% 0%
Hinjewadi 32 - 45 0% 3%
Hadapsar/Fursungi 38 - 65 0% 17%
Kharadi 32 - 65 0% 0%
INDICATORS 2014 2015
Vacancy
Absorption
Construction
Rental Value
Capital Value

2. 2 Research & Forecast Report | January 2015 | Colliers International
CLIENT BUILDING NAME AREA (SF) LOCATION LEASE / SALE
BMC Business Bay 252,000 Yerwada Lease
HSBC Business Bay 505,000 Yerwada Lease
Cognizant Wadhawa IT Park 150,000 Hinjewadi Lease
Flextronics Embassy Tech Zone 138,000 Hinjewadi Lease
HDFC Bank MIT Marathon 124,217 Bund Garden Road Lease
Source: Colliers International
Top 5 Transactions of 2014
Key Under Construction Projects
BUILDING NAME DEVELOPER AREA (SF) LOCATION POSSESSION
SP Infocity Building 5 Shapoorji Pallonji Group 800,000 Phursungi 2015
Commerzone Building 8 K Raheja Corp 420,000 Yerwada 2015
Acendas Phase II Acendas 615,000 Hinjewadi 2015
Notes:
1. Office Market: The prime office sub-markets of Pune include CBD (Deccan Gymkhana, Bund Garden Road, Senapati Bapat Road & Camp), Off CBD (Aundh, Airport Road and
Kalyani Nagar) and the eastern corridor, along with Nagar Road and Kharadi, which have emerged as a preferred location for financial and IT/ITES companies.
2. Rents/Capital Value: Market average of indicative asking price for Grade A office space.
3. Available Supply: Total Grade A office space being marketed for sale or lease in surveyed quarter.
4. City Barometer: Represents increase, decrease or stable scenario; as compared to previous quarter.
5. All the figures in the report is based on market information as on 25th December 2014.
Average Rental And Capital Value Trend
6,000
7,000
8,000
5,000
4,000
3,000
2,000
1,000
0
80
70
60
50
20
10
40
30
0
RentalValuesINRPerSq.Ft.PerMonth
CapitalValuesINRPerSq.ft.
Forecast
New Supply, Absorption And Vacancy Trends
6
5
25%
20%
15%
10%
5%
0%
4
3
2
1
0
2010 2011 2012 2013 2014 2015F 2016F
New Supply (In Mln sqft) Absorption(In Mln sqft) Vacancy(In %)
which seems to be in tandem with the expected absorption.
Most of this supply will be located in suburban and
peripheral micromarkets. East and west Pune micromarkets
will continue to interest occupiers due to availability of
large floor plates, better infrastructure and proximity to
residential pockets of the city.
During the year, average rental values registered an increase
of 3% YoY, which was contributed by micromarkets like
Airport Road/Pune station, Hinjewadi, Hadpsar and
Phursungi. Other micromarkets witnessed a stable rent
scenario during the year. Capital values this year remained
stable YoY across all micromarkets.
Trends to watch for in 2015:
The office market outlook for 2015 looks promising for
Pune. IT/ITeS will continue to play an important role in
the city’s overall commercial office space absorption,
primarily attributed to projects that have already seen pre-
commitments or long-established interest from various IT/
ITeS companies.
Overall rents and vacancy levels are unlikely to change in view
of the supply in tandem with absorption. However, rents in
SEZ are expected to increase due to the very limited space
available and the thin supply pipeline.
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Primary Authors:
Surabhi Arora
Associate Director | Research
+91 124 456 7500
surabhi.arora@colliers.com
Sachin Sharma
Assistant Manager | Research
Amit Oberoi I National Director
Valuation & Advisory Services & Research
For Office Services:
George McKay
South Asia Director | Office & Integrated Services
george.mckay@colliers.com
Rishav Vij I Associate Director
rishav.vij@colliers.com
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