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Commercial real estate transactions in 2018 higher, yet vacancy levels increase
Times of India  |  January 18, 2019

TNN Pune

New office constructions picked up in the city more than any of the other top cities in 2018, but so have vacancy levels.


This was revealed in separate studies conducted by property consultants Knight Frank and Anarock. As per the studies, despite supply and absorption of the new supplies going up, there was an upward pressure on rentals.


Rental prices — measured in per square feet — have increased by 13% in 2018 (over 2017), Knight Frank report stated, while that of Anarock estimated the rental prices going up by 5%. Also, despite a higher amount of office space getting delivered, both the studies showed that vacancies had also increased.


The primary reason for the demand-supply mismatch is that the new units were coming up only in areas &ndash like Kharadi and Hinjewadi &ndash and since the grade A supply is less, the vacancy levels were high at about 7.5%.


The Knight Frank’s study showed that properties worth 6.6 million square feet were transacted in 2018 against 4.6 million square feet in 2017. About 2 million of the new space that was transacted in 2018 was pre-committed.


The Anarock’s study showed that 4.2 million square feet worth of office space was absorbed in 2018 versus 3.9 million square feet in 2017.


“Several occupiers are still not able to find the desired space and this supply crunch is forcing them to look out for built-to-suit options or enter into pre-commitments,” Knight Frank said in its half-yearly report. It added that despite such record additions in supply, the problem of supply crunch persisted in the Pune market.


Paramvir Singh Paul, branch director — Pune, Knight Frank, said supply challenges were putting pressure on rentals. “Even the new supply that is likely to come up in the second half of 2019 is also pre-committed. Therefore, the stress is likely to persist and there is a likelihood of rentals going up further,” he added.


Pune’s average office rental price at Rs 71/sqft in 2018 was 13% higher than what it was in 2017. However, the average office rentals in Pune were lower than Mumbai Metropolitan region (Rs 117/sqft), the National Capital Region (Rs 83/sqft) and Bangalore (Rs 74/sqft), according to Knight Frank.


Anarock data trends indicate a 29% rise in overall office space supply in 2018 compared to 2017, which was the second best across the top 5 cities including Bengaluru, MMR, NCR and Hyderabad.