Thursday 9 February 2012

Retail gains momentum in Chennai

Demand from retailers and influx of quality supply in the near term augur well for Chennai’s retail scenario. Construction activity in Chennai’s retail segment picked up pace in the second half of last year due to increase in demand from retailers both in CBD and Off CBD locations.

A majority of the developers and large scale land owners are coming up with larger floor plates while few land owners are willing to go ahead with BTS (Built-to-suit) options in order to cater to enhanced demand levels from retailers.

During the last six months, most of the construction activity was limited to high street locations such as Nelson Manickam Road, Poonamallee High Road, Adyar, TTK Road, North Usman Road and Velachery.

Approximately 300,000 sq ft of retail space was released during the last six months in this micro market. Chennai retail market is expected to witness the completion of almost 2.6 million sq ft of mall space by the end of second half of this year, according to CB Richard Ellis survey.

Rental values on high street locations of Nungambakkam High Road, T Nagar and Anna Nagar remained stable, while those in Adyar and Velachery depreciated by almost 20% and 11% respectively. On the other hand, Alwarpet observed a rental increment of 12-13% during the review period, largely attributed to an increase in demand for large retail spaces, ready fit out options and built to suit proposals in the upcoming projects.

Rental values witnessed pressures in retail mall properties, with a decline of almost 30% in Spencer Plaza (Anna Salai) and around 5-10% in Chennai Citi Center, Ampa Skywalk Mall and Express Avenue. A key reason for drop in mall rentals has been the reducing sales and declining footfalls, largely attributed to an unfavorable tenant mix and poor infrastructure facilities in these malls.

The retail real estate market in the city is expected to maintain an optimistic trend over the next few months. This is largely due to increase in demand from retailers and release of quality supply in the near term. Rental values are expected to witness an increase in select developments in the CBD / Off CBD micro markets, while remaining stable elsewhere.

Source: http://content.magicbricks.com/retail-gains-momentum-in-chennai

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