BENGALURU: Major office hubs in Chennai continues to attract corporate occupies, during the first quarter of 2016, most of the demand for prime office space was driven primarily by the IT/ITeS, BFSI and insurance, engineering and manufacturing sectors, according to a recent CBRE report – India Office marketview – Q1, 2016.
“Leading SEZ properties in the city also witnessed considerable traction. In line with demand trends over the last five years, corporate occupier interest remained upbeat across the city of Chennai during the first quarter of 2016 as well,” said Ram Chandnani, MD – Transaction Services CBRE South Asia
Limited availability of commercial office space was noted in certain micro-markets located in proximity to the city, such as OMR Zone 1, Guindy and Mount Poonamallee Road. Moreover, office space demand in these localities remained considerably higher as compared to other office districts in the city because of the concentration of other key corporates and adequate physical and social infrastructure.
“While around 3.2 mn SF of office space is expected in the OMR & Guindy in 2016, around 80% of this supply is concentrated in 2 SEZ developments and the rest is spread over multiple smaller projects. In addition, around 25% of this supply has been pre-leased,” Chandnani said.
The low vacancy levels in these micro-markets led corporate firms to seek real estate options in locations such as OMR Zone 2, which saw an increase in occupier demand by about 50% on a year-on-year basis in 2015. Ambattur witnessed a demand increase of about 100% on y-o-y basis, and OMR Zone 3 noted significantly higher absorption levels during 2015. As a consequence, the rental values in these office districts also saw an uptick during 2015 in these locations.
This increase in demand for office space is expected to drive demand for the housing market in neighborhoods including Thoraipakkam, Sholinganallur, Navalur, and Perumbakkam. This anticipated trend may bring down unsold inventory levels in these locations. On the other hand, developers would look to exploit this opportunity by acquiring land parcels to develop commercial office space. This trend is expected to be seen in the coming years.
A few regional developers have begun to acquire properties for new commercial / IT development to meet the demand/supply mismatch of investment-grade corporate space in the city. Furthermore, national and global development firms are currently at various stages of project initiation or land acquisition. Most of this proposed office space supply, however, is not expected to hit the market before 2019-20.
Increased corporate occupier demand in quality IT and IT SEZ projects at Guindy, Velachery, Perungudi, Mount Poonamalle Road and Taramani in Chennai resulted in a quarter-on-quarter rental appreciation of 2-10% across these micro-markets during the January to March 2016 period. Moreover, a rental increase of 2-6% q-o-q was witnessed across non-IT spaces in certain micro-markets of Chennai during the quarter. Office space rentals at the SEZ development on Mount Ponnamalle Road, in fact, noted a rise of more than 15% in Q1 2016 over Q1 2015, translating into an office district that saw one of the strongest annual office rental growths among leading cities in the country during the period. IT developments at Ambattur also saw a 15% year-on-year rental rise in the first quarter of the year, as another micro-market that saw strong annual office rental growth in India.
Credits ET Realty