With most of the new supply scheduled for completion in 2018, vacancy in Pune market is likely to remain tight in the short term. We cannot rule out the possibility of further increase in rent as the additional supply infusion may not meet the pent-up demand of the last few quarters. In our opinion, the market is likely to remain tilted in property owners' favour for a while. In our view, developers should expedite completion of projects under construction and plan more new projects to profit from the untapped demand in the market.

1. Upward pressure
on rents to
continue
Akshay Jawale Analyst | Mumbai
With most of the new supply scheduled for
completion in 2018, vacancy in Pune market is likely
to remain tight in the short term. We cannot rule out
the possibility of further increase in rent as the
additional supply infusion may not meet the pent-up
demand of the last few quarters. In our opinion, the
market is likely to remain tilted in property owners'
favour for a while. In our view, developers should
expedite completion of projects under construction
and plan more new projects to profit from the
untapped demand in the market.
Forecast at a glance
Demand
Demand for small sized offices should
continue along with big corporations
looking for larger plate sizes
Supply
No new supply expected in 2017;
although we might witness 2 million sq ft
(1,85,806 sq m) of new supply in Q1
2018, but high-quality supply will remain
scarce due to pre-leasing commitments
Vacancy rate
Owing to existing pre-commitments in
upcoming projects, we expect vacancy
levels to fall further to 5% from 7% in
2017
Rent
Upward pressure on rents should
continue with an average increase of 8-
9% in markets like Kharadi, Hinjewadi,
Hadapsar and Fursungi
Price
Prices to remain stable owing to subdued
investor activity
Limited supply affecting absorption
adversely
Absorption continues its downward trend primarily due to
the inadequate supply of quality office space in the city.
Absorption in Q1 2017 came down to 0.78 million sq ft
(72853 sq m) from 1.29 million sq ft (119,845 sq m) in
Q4 2016. Large occupiers such as FIS Global Business
Solutions and Cognizant preferred to renew the leases in
the existing facilities.
We expect the supply crunch to impact the absorption
number adversely at least in the next two quarters as
most of the new supply is likely to see completion by
2018.
As is customary in the Pune market, the technology
sector accounted for a primary share of 54%, followed by
engineering & manufacturing (16%), consulting (14%),
banking & financial services (7%) and healthcare (4%).
We observed an increased interest from fintech
companies in expanding their footprint in the city;
however, unavailability of large contiguous floor plates is
a key obstacle to expansion for companies in the city.
Rental Values
Micromarkets Rental
Values1
q-o-q
Change
y-o-y
Change
Baner 52 - 62 3.5% 9.3%
Bund Garden 55 - 69 0% 6.0%
Airport Road/Pune
Station
60 - 90 0% 7.1%
Aundh 50 - 64 0% 3.6%
Senapati Bapat
Road
65 - 120 5.7% 12.1%
Bavdhan 42 - 50 3.4% 7.0%
Kalyani Nagar 52 - 65 0% 3.5%
Nagar Road 52 - 65 0% 4.5%
Hinjewadi 44 - 55 0% 7.6%
Hadapsar/Fursungi 65 - 75 10.2% 19.7%
Kharadi 52 - 100 5.6% 16.9%
Source Colliers International India Research
1
Indicative Grade A Rental in INR per sq ft per month
Colliers Quarterly
PUNE | OFFICE
13 April 2017

2. 2 Colliers Quarterly | 13 April 2017 | PUNE | Office | Colliers International
In Q1 2017, demand followed the supply: hence new
leasing remained scattered among all micromarkets.
Most of the leasing was concentrated in Kharadi 17%,
Viman Nagar 10%, Aundh 10% and CBD 7%. Other
micro markets such as Hinjewadi, Hadapsar, Fursungi
shared only 3 - 6% of the overall leasing volume.
Gross Office Absorption in million sq ft
Source Colliers International India Research
Vacancy levels unlikely to improve
in 2017
The city's commercial real estate is currently reeling
under a severe supply crunch and struggling to meet
occupiers' demand. Although supply is likely to remain a
key concern in Pune commercial market until Q1 2018,
the city may see completion of EON Phase 2 adding 2
million sq ft (185,806 sq m) of Grade A supply to the city
inventory in Q1 2018.
Most of the future supply benefits from high pre-
commitments from existing clients; thus, the vacancy is
unlikely to improve during 2017. Any delay in scheduled
project completion will probably further adversely affect
occupiers' sentiment. We have also witnessed the
launch of a couple of new projects in the Pune market in
Q1 2017 including Sallarpuria Sattva Tech Point (0.4
million sq ft/33,445 sq m) in Kharadi and One Square
(0.1 million sq ft/10,219 sq m) in Baner-Pashan Link
Road. In our opinion, these projects will take at least 18-
24 months to become ready to occupy, and so will not
contribute greatly to resolving the supply issue in the
short term. Occupiers looking for expansion in the long
term may consider pre-committing space in these
upcoming projects.
Upward pressure on rents to
continue till Q1 2018
In line with our earlier forecast, rents followed an uptrend
in Q1 2017 and recorded a 2% q-o-q increase. The key
micro markets contributing to the increase in rents were
Hadapsar, Fursungi, Kharadi and Senapati Bapat Road.
In our opinion, there would be an upward pressure on
rents primarily in technology sector driven markets such
as Kharadi, Hinjewadi, Hadapsar and Fursungi. In the
next couple of quarters, the commercial office market is
likely to remain favourable for developers and landlords.
We reaffirm our view that the increasing rents are a
concern as continued rent growth may lead to a trend
whereby occupiers start choosing other competing cities
for their expansion.
Rental and Capital Value Trend (INR)
Source: Colliers International India Research
We expect newly elected Municipal Corporation in Pune
and Pimpri-Chinchwad to announce infrastructure
improvement projects. In Q1 2017, the technical surveys
for the Pune Metro have been kicked off, and metro lines
connecting East-West, and North-South parts of the city
stretching over 31 km are scheduled for operation in
2021.
The Pune Municipal Corporation has sanctioned new
development control regulations permitting higher floor
space index (FSI) in the Transit Oriented Development
(TOD) Zone along the proposed Metro corridor. The
micro markets along proposed the Pune Metro such as
Deccan, Bund Garden (CBD), Aundh, Wakad, Hinjewadi,
Pimpri-Chinchwad (Northwest Pune), Yerwada, Kalyani
Nagar, Viman Nagar and Kharadi (Northeast Pune) are
likely to expand further aided by the increase in floor
space index (FSI).
0.00
1.00
2.00
3.00
4.00
5.00
6.00
2011 2012 2013 2014 2015 2016 2017
Q1 Q2 Q3 Q4
0
1000
2000
3000
4000
5000
6000
7000
8000
0
20
40
60
80
100
120 Q12011
Q12012
Q12013
Q12014
Q12015
Q12016
Q12017
Q12019F
Q12020F
Rental Values Capital Values

3. 3 Colliers Quarterly | 13 April 2017 | PUNE | Office | Colliers International
Colliers View
With the expected completion of about 2 million sq ft
(185,806 sq m) Grade A office space by early 2018, the
Pune market is likely to revive in terms of absorption.
Against a backdrop of constant demand and low
vacancy rates, we expect upward pressure on rents at
least until Q1 2018. The supply situation is not likely to
change until 2018.
In our opinion, developers should expedite the
completion of projects under construction and plan more
new projects in order to tap the demand.
MAJOR TRANSACTIONS IN Q1 2017
CLIENT BUILDING NAME
AREA (SQ
FT)
LOCATION LEASE/SALE
Barclays Technology Centre EON Free Zone 100,000 Kharadi Lease
Johnson Control India Commerzone B2 71,000 Yerwada Lease
Bajaj Finance Business at Mantri 40,000 Nagar Road Lease
EFC Business Centre JK Infotech Tower - B 36,000 Hinjewadi Phase - 1 Lease
Teradata Cybercity Tower 12 44,000 Hadapsar Lease
Source: Colliers International India Research
KEY UNDER CONSTRUCTION PROJECTS
BUILDING NAME DEVELOPER AREA (SQ FT) LOCATION POSSESSION
EON Phase 2 Panchshil Realty 2,00,000 Kharadi 2018
Marvel Trueno Marvel Realtors 450,000 Viman Nagar 2018
Vikram Monarch Vikram Developers 130,000 CBD 2017
Source: Colliers International India Research
For more information:
Surabhi Arora
Senior Associate Director
Research
+91 124 456 7500
Surabhi.arora@colliers.com
Rishav Vij
Senior Associate Director |
Office Services
Rishav.vij@colliers.com
5th Floor, Suyog Platinum
Tower, Naylor Road, Off
Mangaldas Road
Pune - 4110011 | India
Copyright © 2017 Colliers International.
The information contained herein has been obtained from
sources deemed reliable. While every reasonable effort has
been made to 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.
Notes:
1. Office Market: The major business locations in Pune include CBD Deccan Gymkhana, Bund Garden Road, Senapati Bapat Road and Camp). Off
CBD (Aundh, Airport Road and Kalyani Nagar) and the eastern corridor, along with Nagar Road and Kharadi, which has emerged as preferred
location for BFSI and IT-ITeS sector)
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. All the figures in the report are based on market information as on 25th March 2017