With limited availability and high demand for high-quality office spaces in the city bringing about the lowest vacancy rates in three years and steadily increasing rents, Pune is facing a commercial real estate supply crunch.
With limited availability and high demand for high-quality office spaces in the city bringing about the lowest vacancy rates in three years and steadily increasing rents, Pune is facing a commercial real estate supply crunch. The market is opting for solutions ranging from converting the non-performing retail and hospitality space into offices, refurbishing of failed malls, tenants pre-committing to space under construction or opting for commissioning of build-to-suit construction. Office space demand in Pune is strong, but handicapped because of supply issues. Pune’s office space supply crisis will result in the opening up of new commercial areas – and solve the problem of failed malls at the same time, says JLL India.
“Most of the upcoming large projects are in the initial construction stages and may take between 18-36 months to complete. A short-term option to induce faster supply is to revive under- or non-performing commercial buildings in the retail or hospitality segment and converting them into office spaces. In fact, the market is heading towards both these directions to reduce the demand-supply gap,” Alok Jha, AVP, Research JLL India, said.
Another source of supply is the refurbishment of retail or mixed-use developments with the commercial space as a part of the product mix, Jha said. According to Jha, the limited availability of spaces within Grade A office projects in Pune is causing tenants to commission built-to-suit construction, pre-committing to space in under-construction projects or opting for Grade B properties. Infosys, Siemens, Amazon and Citibank had secured spaces when the buildings were still being constructed while companies such as Accenture, Bitwise and Eaton preferred the built-to-suit option, Jha said.
Pune’s low office space vacancy rate of around 6% is proving to be a serious challenge for companies seeking large spaces to establish or expand their operations in this thriving city.