By: Anshuman Magazine, CMD, CBRE South Asia
Track2Realty: A burgeoning automobile ancillary industry and the IT/ITeS sector’s growing presence have been the major growth drivers behind the notable transformation of Maharashtra’s second largest city—Pune. Over the past couple of years, the city’s IT sector in particular has seen significant growth, leading to sustained demand for office space in the city.
The State Government of Maharashtra’s initiative to promote Pune as an IT/ITES destination; and promoting the Rajiv Gandhi IT Park (Hinjewadi) as an IT/ITeS knowledge center by acquiring large tracks of land and inviting large Indian MNCs such as Wipro, Infosys, and TCS, in the early 2000s set the tone for the city. Today with quite a few global majors having set up base here, Pune is home to several major IT parks—such as, Magarpatta Cyber City, EON Free Zone, Commerzone, Embassy Tech Park, Marisoft IT Park (Kalyaninagar), Panchshil Tech Park and MIDC Software Technology Park (Talawade).
This demand trend has seen thecity’s Off CBD locations of Magarpatta, Viman Nagar, Nagar Road, SB Road, Aundh, Baner, Shankar Seth Road, as well as the peripheral business districts of Kharadi, Hadapsar, Hinjewadi, and Talawade becoming established as the hotspots for IT/ITeS office space activity.
The city’s premier education institutes have ensured that there is always a great talent pool available for various industries. With over six Universities and more than 500 colleges, the city boasts of leading institutes like the Armed Forces Medical College Pune, the College of Engineering Pune, the Symbiosis Institutes, and the Film and Television Institute of India. Another factor helping to position Pune strategically for businesses in India has been its excellent connectivity to Mumbai, and the infrastructure available due to the Mumbai–Pune Expressway.
Commercial Office Space: Approximately 4.1 million sq. ft. of Grade A office space was transacted in 2013, of which around 2.4 million sq. ft. was absorbed in thecity’s Off CBD micro-market—largely led by IT/ITeS occupiers. On the supply front too, of the approximately 4.4 million sq. ft. of Grade A office space that came on stream during 2013, around 2.16 million sq. ft. was released in the Off CBD market. The city also saw significant SEZ supply addition, with the completion of EON SEZ AatKharadi. Owing to enhanced demand levels, rentals appreciated across most micro-markets towards the end of the year.
Housing Market: During 2013, Wakad, Baner, Aundh and Pashan in the Western region continued to remain priority housing destinations due to their close proximity to the industrial zone of Hinjewadi, easy accessibility to the Mumbai–Pune Expressway, and the presence of a large IT sector workforce. Furthermore, demand remained high in the Eastern regions of Wagholi, Kharadi and Hadapsar owing to availability of developed physical and social infrastructure, established organized retail, and proximity to the city airport. Additionally, close proximity to the EON SEZ, Kharadi and Magarpatta continued to promote Keshav Nagar (Eastern Pune) as a priority housing market. Capital values rose during 2013.
Retail Space: The high-streets of JM Road, Aundh, Koregaon Park and MG Road continued to be the preferred location for retailers, especially from the F&B and fashion segments. In terms of fresh organized retail space supply, Seasons Mall (0.65 million sq. ft.) at Magarpatta City became operational during H22013. Rental values remained under pressure, as retailers adopted a cautious approach amid continued sluggish market sentiments and consumer confidence.
Hospitality Market: Over the last five to six years, Pune saw several hospitality and serviced apartment projects come up. Currently, the city has nearly seven five-star properties, including the JW Marriot, the Hyatt Regency, and the Le Meridien. Additional supply of star-rated properties is under construction, and expected to enter the market by 2015.
Real Estate Investments: Pune’s realty sector has been attracting increasing levels of private equity (PE) activity in recent times, where most investments have been in the nature of structured debt deals with a preference for either residential or well-leased commercial projects. Over the last fiscal, investors have increasingly spotted opportunity in fully leased IT parks and SEZs in the city.
One of the most significant deals last year saw Blackstone investing approximately Rs. 450 crore for a 50% stake in Panchshil Realty’s SEZ project, Eon Free Zone (leased asset) at Kharadi, Pune. Last year also saw IDFC’s real estate investments arm buying out a constructed and leased phase (Phase I) of Pune-based developer, Paranjape Schemes’ SEZ at Hinjewadi, Pune, for Rs. 460 crore.
Market Outlook: Pune is likely to witness an increase in commercial leasing activity in the forthcoming months. The large anticipated supply addition, along with the consolidation and expansion of existing and new corporate occupiers is likely to generate demand for Grade A office space across all micro-markets in the medium term. The IT/ITeS,and BFSI segments will continue to drive demand for office space in the Off CBD and PBD locations; while a steady supply addition and persistent demand levelsare likely to keep rental values stable across most of the city’s micro-markets in the short to medium term.
Housing demand in Pune is likely to improve further by the second half of 2014. The Eastern and Western Suburbs of Baner, Balewadi, VimanNagar,Kharadi and Hadsapar, located in close proximity to IT and industrial hubs, are likely to attract major transaction activity. Additionally, the proposed infrastructure development of the Pune Metro Rail, the Bus Rapid Transit System (BRTS), and upcoming SEZ developments are all expected to provide impetus to residential developments in the Northern region of Chakan, Tavet and Talegaon.
The city’s organized retail segment is also likely to see significant space addition (1.5 million sq. ft.) in 2014. Key project completions will likely include the Westend Mall at Aundh, the ICC Mall on SB Road, and the Royal Heritage Mall at NIBM. Due to a robust supply pipeline in the organized segment, rentals are likely to remain under pressure in the short to medium term.
