Grade A office absorption in Pune is expected to touch 5.5 mn sq ft during 2022, a likely 53% increase from last year when demand was marred by the lockdowns. Occupier confidence is back in the market, with demand backed by Flex, Consulting, and Tech occupiers.
During H1 2022, office absorption already crossed 3.5 mn sq ft, a five-fold rise from the same period last year. The H1 2022 demand has already surpassed H1 2019 demand by 120%. Year 2019 saw the highest ever annual office space absorption.
With reducing occupier exits and a surge in demand, occupancy levels in the city are improving. After a gap of two years, overall vacancy levels dipped by 50 basis points on a QoQ basis. Average rents in Pune also saw a marginal increase of 1.5% during Q2 2022. The next couple of quarters are likely to drive rental growth further, as demand is likely to remain robust.
Flex space contributed to 34% of the total leasing in Pune, outpacing the Technology sector which accounted for a 15% share in total leasing. Flex spaces in Pune are seeing renewed demand with many large enterprises incorporating a flex space component in their portfolio. Various flex space operators expanded their footprints in the city during H1 2022 through select large deals (>1,00,000 sq ft) in good-quality Grade A buildings.
About 80% of the total flex leasing was through large deals signaling occupiers’ strong preference for utilizing flex spaces. Baner and Off-CBD east (Kalyani Nagar, Koregaon Park, Viman Nagar) are the thriving flex micro-markets that witnessed maximum leasing activity due to their robust social and physical infrastructure, and proximity to key residential locations. In the coming quarters as well, demand for flex space will continue to be robust, as large occupiers continue to pivot towards flex spaces to embrace hybrid work.