By Ashutosh Limaye – National Head, Research & REIS, JLL India
By Ashutosh Limaye
As occupiers in Pune face a severe shortage of quality office assets across most micro-markets, it has led to a scenario where there are hardly any options left for them to occupy space matching their flexibility and preference requirements. An abysmal vacancy rate of ~6% in Pune’s grade-A commercial real estate market is a crisis across most micro-markets, and the bigger occupiers are most affected.
Occupiers not looking for bigger floor plates or the latest amenities and grade-A specifications, are looking towards considering grade-B properties as well. The grade-B office market vacancy stands at 13-15%. Other tenants are either relocating or consolidating leading to a churn in the market in the last few quarters. It is also leading to many occupiers pre-committing space in under-construction projects.
In such a supply-demand scenario, rents are expected to go up. Therefore, developers with average or poorly-performing malls and even hotel owners have started converted such assets into office spaces. An intact occupier demand coupled with the existing supply crunch resulting in rising rentals and REITs expected to launch soon, commercial developments have become an attractive proposition for many developers.
Resultantly, refurbishment of retail developments has recently started emerging as another source of office space supply. For example, Kakde Centerport mall got refurbished into office space. Some other developments are either coming up as mixed-use assets with office space being an integral part of their product mix or refurbishing into such an asset, for example, Amanora mall that is a combination of both office and retail space. Some more such examples are:
· Nitesh Hub – A mall, with an operational retail space on four floors, now plans to add more floors on top of the structure to serve as office space.
· Inorbit – The entire mall is likely to be converted to office space.
· Phoenix Market City – A mall, with an operational retail space on five floors, which now plans to add more floors as office space.
· The Pavilion – An under-construction mall to come up with five floors is expected to dedicate a few floors for office space.
· Another mall is said to be contemplating refurbishment into office space entirely.
· A hospitality asset located in central Pune is likely to be refurbished into an office building.
What else is happening?
· Some national-level developers are looking to expand their commercial portfolios in Pune due to the market dynamics.
· The city is also likely to see the emergence of new commercial corridors and unexplored micro-markets such as Nanded City, Pirangut and the Pune-Chinchwad Municipal Corporation area. Future launches in these areas will get evaluated with respect to their strategic location, available infrastructure and relatively lower cost of land.