Chennai Office Mart buoyant

Chennai

Chennai’s office market has absorbed close to 6 lakh sq ft till February. Corporates are consolidating their existing operations and are wary about market gyrations in the midst of global uncertainty. Rentals are holding steady and are unlikely to come down, according to industry experts.

The city had recorded a strong net absorption of over 1.6 million sq ft during fourth quarter last year, while net absorption for the whole year 2011 stood at 4.6 million sq ft. Transactions were dominated by the IT/ITeS firms, which contributed more than 60% of the gross leasing volumes. BFSI contributed around 10% and it was closely followed by the utility sector, which recorded around 9% during the quarter, according to Jones Lang LaSalle report.

Cognizant’s lease of 650,000 sq ft in the Ramanujan IT city was the largest lease transaction recorded in the city during last year. This, in turn has boosted the absorption figures.

Despite strong absorption figures, the city’s overall vacancy rates continued to remain in the range bound to previous quarter largely due to the new supply of office spaces during the quarter with notable vacancy.

A total of 1.38 million sq ft of new supply entered market during the quarter with over 55% occupancy level. Notable completions during the quarter include – Carr Tower of Ramanujan IT City with 650,000 sq ft in Taramani, Block 3 of DLF IT SEZ with 684,000 sq ft in Mount Poonamallee Road, and ASV Titanium with 50,000 sq ft in Perungudi.

The SBD sub-market recorded 2.5% quarter over quarter increase in rent as it grew more than the rent in CBD. The suburbs of Chennai also witnessed a notable 3.6% quarter over quarter increase in rent after prolonged stability as the leasing activity strengthens in the OMR pre-toll area.

Outlook

Chennai office market is expected to remain tenant friendly in the near term amid high vacancy levels and uncertain macro-economic headwinds. It is expected that the vacancy rates may stay higher in the SBD and PBD amid massive new supply expected in the coming quarters. As a result, there is limited scope for a significant rental and capital value appreciation in the short-term.

Source: http://content.magicbricks.com/chennai-office-mart-buoyant