IT/ITeS Cities Have Lowest Grade A Office Vacancies, Pune Lowest at 8.5%

• IT Office Vacancies in Chennai at 10.35%, Bengaluru at 11.25%, Hyderabad over 15%
• Cities not primarily driven by IT/ITeS, including NCR, have maximum office vacancy at 28.5%, Kolkata with 23.5%, MMR with approx. 16%
• NCR, MMR & Kolkata restricting new office stock supply in the future
• NCR has approx. 26 Mn sq. ft. of planned or under construction office stock; MMR has just 15 Mn sq. ft. of such stock, Kolkata with 2 Mn sq. ft.
• In contrast, the four IT/ITeS driven cities collectively have 108 Mn sq. ft. of planned/under construction Grade A office stock

Mumbai, 21 June 2022: IT/ITeS remained one of the most buoyant sectors during the pandemic. This sector helped India’s top four IT/ITeS-driven cities to keep Grade A office vacancies firmly in check. Latest ANAROCK research indicates that the IT hubs Pune, Bengaluru, Chennai and Hyderabad currently have lower Grade A office vacancies.

In contrast, cities like NCR, MMR and Kolkata, with significant office demand also coming from non-IT sectors such as BFSI and manufacturing/industrial, recorded higher office vacancies.

Pune currently has the lowest office vacancy at 8.5%, followed by Chennai with 10.35%, Bengaluru with 11.25% and Hyderabad with over 15%. Office vacancies in NCR are the highest among the top 7 cities at 28.5%, followed by Kolkata with 23.5% and MMR with approx. 16%. On correlating current vacancy data with upcoming planned or under-construction office supply across the top 7 cities, it is clear that the three non-IT/ITeS driven cities are now restricting their new office stock.

Anuj Puri, Chairman – ANAROCK Group, says, “NCR currently with the highest vacancy levels has approx. 26 Mn sq. ft. of planned or under-construction office stock, while MMR has just 15 Mn sq. ft. of such inventory. Kolkata has a mere 2 Mn sq. ft. of planned or under-construction office stock. This upcoming Grade A office stock is scheduled to be deployed in the respective cities within the next two to three years.”

The cities with lower office vacancy levels currently have 108 Mn sq. ft. of cumulative planned/under construction Grade A office stock. Of this, Hyderabad and Bengaluru have approx. 40 Mn sq. ft. each planned or under construction. Chennai has 15 Mn sq. ft. in the pipeline, and Pune has 13 Mn sq. ft.

“The IT/ITeS sectors boomed during the pandemic,” says Puri. “While most companies operated in WFH mode, many large and mid-sized corporates decided to hold on to their office spaces. At between INR 58 and INR 78 per sq. ft. per month, the average monthly office rentals in all four IT/ITeS driven cities are comparatively lower than in NCR and MMR, where they hover between INR 80 and INR 126 per sq. ft./month.”

Many large and mid-size occupiers continued or renewed their leases during the pandemic because their business either saw no major impact or even grew during COVID-19. The cost of re-establishing or taking up new office space is costlier than holding on to existing leased spaces. Also, real estate costs are largely factored in IT/ITeS companies’ billing rates, so letting spaces go can lead to a significant change in top-line projections.

Current Office Stock vs Planned/Under-construction Stock – Top 7 Cities

In an interesting post-pandemic twist, the top cities with high available office stock along with high vacancies are now looking to reduce new office supply in the future. With the notable exception of Bengaluru, office developers in these cities are becoming increasingly cautious about adding new office supply.

• Currently, Bengaluru has the maximum Grade A office stock of approx. 168 Mn sq. ft., with office vacancy at 11.25%. Nevertheless, the city has approx. 40 Mn sq. ft. of new Grade A office stock planned or under construction. This stock will hit the market in the next 2-3 years 
• MMR currently has approx. 108 Mn sq. ft. Grade A office stock, with vacancy of over 16%. Currently, just 15 Mn sq. ft. of new office stock is planned or under construction in the region
• NCR currently has 128 Mn sq. ft. of Grade A office stock, with vacancy of 28.5% – the highest among the top 7 cities. The region currently has approx. 26 mn sq. ft. of new Grade A office stock either planned or under construction
• In Kolkata, the total available Grade A office stock is 25 Mn sq. ft., and vacancy stands at 23.5%. Approx. 2 Mn sq. ft. of new office stock are currently either planned or under construction in the city
• Hyderabad currently has Grade A office stock of approx. 80 Mn sq. ft., with vacancy at over 15%. Like Bengaluru, the city currently has over 40 Mn sq. ft. of new Grade A office stock either planned or under construction
• Pune currently has 60 Mn sq. ft. of Grade A office stock, with the lowest vacancy of 8.5%. There is approx. 13 Mn sq. ft. of new Grade A office stock either planned or under construction in the city
• Chennai currently has approx. 55 Mn sq. ft. of Grade A office stock available, with a vacancy of 10.35%. Approx. 15 Mn sq. ft. of new Grade A office stock is either planned or under construction in the city.

Related: South Cities’ Office Vacancies Rise in H1 FY22 Despite High Net Absorption