Office rents in Pune up 13% on higher leasing, subdued supply

New Delhi: Office rents in Pune have risen by 10-13 per cent in the last one year on higher demand for office space and subdued supply, according to property consultant JLL India.

"After years of stable rental growth thanks to the y-o-y supply-demand ratio remaining almost at par, Pune has seen a rapid growth in office rents over the last four-six quarters," JLL India National Director-Research Ashutosh Limaye said in a report.

He attributed the rise in rent to increase in absorption of office space and subdued supply.

"The annual rental growth witnessed in Grade-A projects is to the tune of 10-13 per cent," Limaye said.

The supply of Grade-A office space stood at 10.5 million sq ft from the third quarter of 2012 calendar year to the third quarter of 2015, while absorption of office space was 12.6 million sq ft in the review period.

"The overall vacancy in Pune has reduced from 16 per cent in 2011 to 5 per cent in 2015. The absorption in Grade-B buildings has increased significantly in the last four-six quarters," he said.

JLL said securing space in the form of pre-commitment has been an increasing trend in Pune due to the limited vacant space in completed Grade-A projects.

The limited availability and comparatively higher rents in Grade-A projects has given rise to a trend of tenants securing space in built-to-suit (BTS) properties or opting for Grade-B properties in Pune, the consultant said.

"On the back of continuing demand, office rents will keep increasing across the city until enough fresh supply becomes available," Limaye said.

The demand for office space in 2015-2016 will primarily be driven by companies in IT/ITeS and banking, financial services and insurance (BFSI) sectors.

The contribution of BFSI to the total absorption has shown continuous improvement in the past few quarters and there will be need for office spaces for these companies too.

JLL said the supply of office space dried up as few years ago developers anticipated a possible situation of oversupply and as a result few players de-notified their special economic zones (SEZs) or decided to build housing projects instead of commercial complexes.