Pune: The transactions in the office space of real estate segment have dropped by 12 per cent in the first half (H1) of 2017 owing to the shortage of relevant office supply for the city’s largest occupier segment, Information Technology (IT) and Information Technology Enabled Services (ITeS).
According to the Knight Frank India Real Estate Residential and Office January–June 2017 survey, a supply crunch of relevant office space coupled with headwinds faced by the IT industry has frozen transactions in the market.
“While IT and ITeS segment saw 64 per cent of total office space transactions in H1 2016, the transactions in this year dropped to 60 per cent. An unavailability of appropriate office space in the Pune market to meet the needs of the IT sector coupled with the headwinds that the Indian IT industry is facing due to the anti-outsourcing wave in the developed markets and the automation drive has led to a reduction in transactions,” the survey report stated.
Elaborating further, Senior Branch Director, Pune, Shantanu Mazumder said the transactions have dropped despite the increase in new completions. “H1 2017 recorded 1.7 million sq ft of new office space completions, a 35 per cent rise over H1 2016. However, a significant portion of these were small projects with leasable area of less than one lakh sq ft, which are not the ones desired by the city’s top occupier industries,” he said.
He added that the rise in popularity of co-working spaces, mainly occupied by start-ups, has led to a decrease in transactions. “Co-working spaces have emerged as the dark horse in this regard. Co-working spaces involve groups of start-ups, creative consultants, freelancers and Small and Medium Enterprises (SMEs) which share the workplace and breakthrough ideas, expand their business horizon and gain a fresh standpoint on their own businesses by dint of sharing workspaces.
Such co-working spaces have taken up as much as 1.28 lakh sq ft of office space during H1 2017. Markets like Baner, Nagar Road and Hadapsar are popular co-working space locales,” the survey report revealed.
He said that co-working spaces have ensured a leap in percentage of transactions by micro-market and other services from 13 per cent in H1 2016 to 22 per cent in H1 2017.
Mazumder added that the vacancy levels in the city are at a record low. “The office space vacancy levels in 2009 stood at 28 per cent and have been reducing ever since. In H1 2017, the vacancy levels in the city stood at 7.9 per cent. The vacancy levels in areas such as Kharadi, Vimannagar, Yerawada and Nagar Road are even lower as these areas are highly preferred by occupiers with absolutely no availability of good quality office space,” he explained.
According to Mazumder, a similar situation is expected for the second half of the year as no major new supply has been lined up. “Lot of supply is set to hit the market by mid to end of 2018 which will ease the office space availability scenario,” he added.