Chennai office market shifts to diversified occupier base

Chennai

The Chennai office market has moved from being absolutely IT/ITES dominated to more diversified occupier base, according to a survey by Knight Frank India. The emergence of newer sectors bodes well for the city’s office market. Although IT/ITES sector continues to be affected by economic constraints, with the market reflecting cautious optimism, leasing levels should remain firm and not decline drastically. Rental values are expected to remain constant, although marginal appreciation is envisaged in projects which are witnessing some amount of leasing.

The city witnessed a higher number of transactions in Q1 FY 2013. While CBD and off CBD locations witnessed 16% share, both SBD and PBD locations witnessed 42% each. This can be attributed to the increased proliferation of non-IT companies. Prominent engineering firms like L&T, Dorschel and Lloyds were responsible for contributing towards the increase in office space absorption in Q1FY 2013. Some of the key occupiers in the CBD include companies such as RRKR Steel, Artha Money, Lloyds, Mitsubhishi and Emaar MGF.

Major occupiers in SBD locations include India Cements, Aditya Birla Group, Emerio Technologies, Bank of New York and Intechi Data. Some of the notable MNC occupiers in PBD region include companies like Amazon, Genesis Telecom, Paypal, Williams LEA and Floorserve. The PBD has several advantages like availability of quality office spaces with larger floor plates and state-of-the-art amenities that is mostly preferred by the IT/ITES due to their large space requirements. Projects like Ascendas IT Park and SP Infocity, were responsible for majority of the office space transactions in the PBD region in Q1 FY2013.

Around 1.20 million sqft of office space was transacted in Q1FY 2012. In contrast, approximately 1.10 million sqft of office space was absorbed in the corresponding period in FY 2013. This depicts the negative impact of the global economic slowdown on the city’s office market. However, a slight increase in the weighted average rentals was observed in FY 2013 over the value in FY 2012, signifying some amount of market traction. Rental values are expected to remain constant, although marginal appreciation is envisaged in projects which are witnessing some amount of leasing.

V Nagarajan, Property Consultant

Source: http://content.magicbricks.com/chennai-office-market-shifts-to-diversified-occupier-base