CHENNAI: Shortage in supply of workplace has led to reduced absorption and higher real estate rentals in Chennai. For your period from January to September this year, deals for almost 3.3 million square feet have already been signed, down from 3.7 million last year. Rentals have, however, shot up by nearly 10% year-on-year.
Chennai’s housing market is driven largely by captive back office operations of large corporations, mostly within the financial services vertical. In almost any given year, the town absorbs nearly 4.3 million square feet of the work place.We are hamstrung by the absence of supply,” said S Ramaswamy, director of real estate consultancy Asset Advice, though “The interest for quality office space remains strong. “Several existing and new players have registered mandates for expansion here, basically we wait around for supply to get in.”
With quality workplace supplies hitting the ground, rentals are rising. “Between Q2 (April-June) and Q3 (July-September) there exists a 5% rise in rentals,” said V S Sridhar, managing director, Chennai market, Cushman & Wakefield, international property consultants. “The key area of the story is the net absorption which is positive,” he said. Net absorption is the new deals signed rather than the same client moving in one location to another. “70% of deals this year is fresh deals,” he said.
Among the top deals within the July-September quarter includes GE signing up for two lakh sq ft in Ramanujan City (in Taramani), World Bank and e-tailer Amazon signing up for 70,000sqft each at SP Infocity in Perungudi and Freshdesk adding another 80,000sqft at SP Infocity. Certain micro markets are witnessing good appreciation in rentals. For example, for IT spaces in Sholinganallur and beyond rentals are now nearly 28 a sq . ft . from 24 earlier.The pipeline of strong. Deals c may get inked when fresh supplies start arriving.
Indicative rentals at OMR (up to toll plaza) which was between 50 to 65 has risen to a minimum 60. Central business district rentals have risen to nearly 80 a square foot from 75 a sq . ft ., industry sources said. At the current run rate, real estate industry sources have guided to some 4.5 million sq ft of absorption for 2016 compared to 5.2 million sq ft in 2015.