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Bengaluru pips Pune in overall office space activity in H1 FY23: Report

According to Anarock, Bengaluru and Pune remain the top commercial office destinations for IT-ITeS (Hindustan Times)Premium
According to Anarock, Bengaluru and Pune remain the top commercial office destinations for IT-ITeS (Hindustan Times)

Both Pune and Bengaluru have seen the IT and ITes dominating office space demand over the last decade. However, Bengaluru has stood its ground despite past office demand slowdowns, including during the Covid-19 pandemic.

New Delhi: Bengaluru has surpassed Pune in overall office space activity with about 6.1 million square feet (mn sq ft) of new office completions and about 6.08 million square feet of absorption in the first half of FY23, property consultant Anarock said in a report.

“During the period, Pune saw a mere 0.85 million square feet of new office completions and approx. 1.35 million square feet of office space absorption in H1 FY23," it added.

According to Anarock, Bengaluru and Pune remain the top commercial office destinations for IT-ITeS ( Information Technology Enabled Services) sectors and co-working occupiers.

“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," said Prashant Thakur, senior director of Research, Anarock Group.

Both Pune and Bengaluru have seen the IT and ITes dominating office space demand over the last decade. However, Bengaluru has stood its ground despite past office demand slowdowns, including during the Covid-19 pandemic.

“It remains the country’s most active office market with approx. 6.08 mn sq. ft. net absorption in H1 FY23 - the highest recorded in the city in the last six years," it said.

Bengaluru’s new office supply witnessed a 16% 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 added.

The report added that the average monthly office rentals in the city during H1FY23 stood at 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," it added.

However, for Pune, the average monthly office rentals in H1FY23 increased by 6 percent to 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% of the leasing market share in Bengaluru, the IT-IT-eS sector led office market occupancy in the first half of FY23, followed by the banking, financial services, and insurance (BFSI) and co-working at 30% and 18%, 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. "There is considerable uncertainty in many global economies, including Europe and the US, as they battle high inflation.“

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