Office rentals remain stable in Chennai

Chennai

The office market in Chennai has absorbed 1.7 million sq ft of space till the end of second quarter. This includes SEZ space as well. A significant development is that most of the transactions has been reported in and around the IT corridor (OMR). Industry sources attribute to the spurt in the number of ongoing residential projects and improved connectivity levels in and around the IT corridor. According to industry sources, rentals for office space across all micro markets are stable and are unlikely to show any marked improvement during the coming quarters.

The absorption level during the second quarter was mostly attributed to the spill-over effects of office space requirements initiated by corporates during last year. No new transactions for large floor plates could be seen recently which, according to the market sources, is again attributed to the slow decision-making process aggravated by the cascading impact of global meltdown. However, a major thorny issue in Europe has been resolved as a result of which new enquiries are expected to trickle in the coming quarters, say market sources.

Vacancy levels are coming down and rentals are stabilising across all micro markets and in some cases there is a marginal pressure on the rentals, say realtors. Though transactions beyond the toll gate on OMR are said to be on a limited scale, large floor plate requirements can be catered only in this market as availability and multiple options abound in and around the area.

According to property consultants, vacancy levels are expected to remain higher amid influx of new supply level at 6.24 million sq ft before the end of the year. There are others who feel that the absorption level is likely to improve in the second half of the year, as an employer survey has revealed optimistic hiring trend during the period.

Leased commercial properties continue to be in demand across all micro markets and the expected yield ranges from 9 to 10 per cent per annum. A few developers are not keen to sell the leased commercial premises in anticipation of the continues demand from MNCs and corporates. This is one reason why the options are getting narrowed across the city for investors in commercial property.

V Nagarajan, Property Consultant

Source: http://content.magicbricks.com/office-rentals-remain-stable-in-chennai