Manufacturing & Warehousing Space Absorption in Pune Expected to Double in 2021

Called the ‘Cultural Capital of Maharashtra’, Pune is the second-largest city in the state after Mumbai. Considered one of the major cities in India, Pune has been a premier educational destination often referred to as ‘Oxford of The East’. Located in the western part of the country, few other epithets that had become popular with the city include ‘Pensioner’s Paradise’ and ‘Queen of Deccan’. 

Besides, the city has been a base for engineering products, design and technologies, electronics and consumer durables, and major research & development and technology centers. Some of the major manufacturing companies that have set up plants in Pune include Tata Motors, Mahindra & Mahindra, Mercedes Benz, 3M, General Electric (GE), Bajaj Auto, Whirlpool, and Volkswagen. 

Today, Pune has eight industrial estates developed by Maharashtra Industrial Development Corporation (MIDC) along major transportation corridors, apart from those that are built on a freehold/private land in and around the city.  

With increasing manufacturing activities, industrial and warehousing absorption has also risen in the city. In 2020, Pune witnessed absorption of 3.9 million sq. ft, manufacturing sector accounting 54.0% of the total, followed by the 3PL sector at 37.2% and e-commerce at 2.2%. On the supply side, the city witnessed completion of 2.5 million sq. ft in 2020, of which over 80% completions /supply witnessed in Chakan-Talegaon and Ranjangaon micro-markets.

Upcoming Logistics Hubs

Chakan, Talegaon, and Ranjangaon are the preferred locations due to the availability of good infrastructure, connectivity, and good quality developments. Major logistics and industrial developers have proposed their projects in these locations.  The Chakan-Talegaon micro-market accounted for 77.4% of the total absorption witnessed in the city in 2020 followed by Ranjangaon at 19.3 % and Nagar Road at 2.3% during the same period. 

Apart from being a large consumer market, factors like steady manufacturing demand, availability of skilled manpower, established vendor base, proximity to the port and international airport have made Pune a preferred destination for industrial and logistics.

In addition, the various proactive measures taken up by the Government of Maharashtra (GoM) in augmenting and expanding the city’s physical infrastructure and developing major infrastructure projects are likely to encourage investments into the industrial and logistics sector. This is also in line with the central government’s initiative of ‘Atmanirbhar Bharat’ that aims to provide state of the art plug and play facilities to encourage manufacturing activities and investments in the country. 

We foresee manufacturing and warehousing space absorption to grow by 108% to 8.1 million sq. ft in 2021 from 3.9 million sq. ft in 2020, driven by robust growth in manufacturing and 3PL sectors. On the supply side, around 6.1 million sq. ft of supply in 2021 against 2.5 million sq. ft in 2020, and the overall vacancy likely to reduce to 4.6% in 2021 from 13.3% in 2020.

The rental and land values are expected to remain stable in 2021 and likely to appreciate marginally in 2022. We expect an uptick in investment activity in the manufacturing sector and high-yielding assets.