Chennai city’s grade A office stock grew phenomenally from just 3.6 million sq ft in 2003 to 51.2 million sq ft in 2013. The city’s office stock development is primarily driven by IT/ITeS sector – a sector whose phenomenal growth has attracted pan-India developers such as DLF, Shapoorji (SP), Tata realty, Divyasree, Prestige and International players such as Ascendas to launch projects in Chennai.
On an average, Chennai records a gross absorption of around 4 million sq ft of office real estate every year. In 2013, we expect around 3.6 million sq ft of gross absorption, given the below-average absorption of around 1 million during the first half of the year. However, with quite a few big transactions in the pipeline, we still expect the second half of 2013 to compensate for the first half’s slowdown, says Alastair Hughes, CEO – Asia Pacific, Jones Lang LaSalle.
Apart from the IT/ITeS sector, Chennai’s broad base of economic activity allows office developers to cater their vacant spaces to other industries such as automotive, semi-conductors, etc. Some of the prominent non-IT players who recently took office space in the city include Renault Nissan, Saint Gobain, Michelin, Flextronics and FLSmidth. Badal Yagnik, Managing Director – Chennai & Coimbatore, Jones Lang LaSalle India says that the city’s office space vacancy is currently around 25 per cent, yet the preferred locations such as Guindy, pre-toll OMR and Mount-Poonamallee Road have very thin vacancy levels.
Rents in these preferred locations rose by 5-10 per cent during the last year. Some of these locations are also seeing increased supply of office spaces. The new blocks of Ramanujan IT city (approx. 2 million sq ft) and SP Infocity (approx. 1 million sq ft) that will become operational this year have been seeing healthy pre-leasing from large multi-national corporates, he added.
