IT expansion leads to demand surge for office space in Pune SBD West micro-market

The commercial sector in India has thrived in the last few decades and it continues to flourish. While the pandemic has led to a temporary fall in the growth of the market, recovery is expected by next year.

Owners of the commercial spaces are now planning their space consumption keeping in mind factors like flexibility in lease terms, minimum capital investment, rental costs, connectivity, commute, and social distancing space.

Besides that, the tenants are also looking for micro-markets. They are looking for space where additional space availability has been created given the recent portfolio optimization exercise that has been undertaken by a majority of commercial occupiers.

A micro-market that has emerged to be a realty hub with appreciation potential amid the ongoing economic crisis is SBD West in Pune.

Assessing the growth of Pune’s SBD West

In Pune, the micro-market SBD West comprising of Baner, Balewadi, and Mumbai-Bangalore highway are seeing an upward growth in demand driven by expansions of IT and tech companies, and the need for flexible office spaces during the pandemic.

SBD West has experienced a year-on-year increase in absorption from 0.5 mn sq ft in 2018 to 1.2 mn sq ft in 2019 and 0.7 mn sq ft in H1 2020 and 2021 SBD West is expected to witness absorption of about 1mn sq ft.

In the last few years, this micro-market has grown to become a prominent location owing to the talent pool that resides in locations such as Kothrud, Karve Nagar, Sinhgad Road, Wakad, Bavdhan, and Pashan.

Various factors like availability of grade-A multi-tenanted buildings, proximity to high-density residential locations, and easy accessibility to Mumbai by road have contributed to the growth. It is an attractive opportunity for occupiers who not looking for exorbitant investments.

SBD West continued to strive and remained occupiers’ favorite even during the hard pandemic time. However it may take some time to reach the pre-COVID 19 levels, we expect to witness green shoots of recovery within the next 6 to 12 months.

Presently the stock stands at 10.90 mn sq ft. Furthermore, it is expected to reach 11 mn sq ft by the end of 2020. By 2021, it will reach 12.20 mn sq ft. The size of space taken up by occupiers in this micro-market is hardly in the range of 30,000 to 100,000 sq.ft. with a few exceptions of larger commitments in the range of 200,000 to 4000,000 sq.ft.

Commitments from flexible office operators have also created a large part of the absorption in this micro-market.

When the occupiers are on a wait-and-watch mode in terms of their real estate strategies, demand, and supply in the next few quarters is expected to increase on account of the expansion of IT and ITes companies and the rising popularity of flexible offices spaces.

While the rentals across the city may experience a marginal reduction owing to the pandemic losses, SBD West is likely to attract a major load of occupiers and tenants. It will happen when the demand is back in the market.