Bengaluru has surpassed Pune in overall office space activity with about 6.1 million square feet of new office completions and about 6.08 mn sq ft of absorption in the first half of FY23, according to a report by property consultant Anarock.
Bengaluru's average monthly office rent climbed by 6 percent in H1FY23 compared to H1FY22; Pune remained significantly more affordable, as per the report.
Pune saw just 0.85 mn sq ft of new office completions and 1.35 mn sq ft absorption in H1FY23, however, it also has the lowest office vacancy among the top 7 cities, the report added.
Prashant Thakur, senior director of Research, Anarock Group, said, "At 7.8%, Pune's office vacancy rate is the lowest amongst all top 7 cities, including Bengaluru - which had an office vacancy of 10.9% in H1 FY23. Both cities recorded similar yearly growth of 6% in average monthly office rentals."
About 6.1 mn sq ft of new office supply was infused in the city in H1FY23 at 26 percent, the second highest share after Hyderabad among the top 7 markets, it said.
The report added that Bengaluru's new office supply witnessed a 16 percent dip compared to the past year. Bengaluru saw a net office absorption surge to 6.08 mn sq ft in H1FY23, surpassing the absorption recorded in the same period in FY22 by 90 percent. This growth was driven by solid new corporate contracts, the report noted.
Average monthly office rentals in the city during H1FY23 stood at Rs 84 per square feet (sq ft). The city’s average office rentals increased by 6 percent over the corresponding period in the previous year. City-wide vacancy levels remained almost stable at 10.9 percent in H1FY23, a marginal change of 0.1 percent over H1FY22.
However, for Pune, the average monthly office rentals in H1FY23 increased by 6 percent to Rs 74 per sq ft. The city’s vacancy rate was pushed up by 3.3 percent from 4.5 percent in H1 FY22 to 7.8 percent in H1 FY23.
With 35 percent of the leasing market share in Bengaluru, the IT-Information Technology Enabled Services (IT-eS) sector led office market occupancy in the first half of FY23, followed by the Banking, financial services, and insurance (BFSI) and coworking at 30 percent and 18 percent, respectively.
“Going forward, to the backdrop of a possible recession in the US in early 2023, it will be interesting to see how far these two cities' office markets will be impacted," Thakur said. There is considerable uncertainty in many global economies, including Europe and the US, as they battle high inflation, he added.
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