The Hindu Business Line : Growth in quality office space in Chennai: Report

Chennai, Aug. 21 The rest of this year will see a major growth in the supply of high quality office space in the secondary business districts and the suburbs of Chennai. There is a healthy demand that would match the supply in the medium term, according to a report by the international property consultants, Jones Lang LaSalle Meghraj.

According to Mr Ramesh Nair, Local Director – Corporate Solutions, Jones Lang LaSalle Meghraj, this would mean that the monthly rental values in the city’s periphery would be stagnant at about Rs 50-55 a sq ft while there would be an upward pressure in the central areas where quality space is relatively restricted.

Availability of retail space is taking a little longer but is expected to grow over the next two years. This will keep the rental values buoyant for now.

After a lull in the availability of Grade A office space in Chennai, the city is witnessing a growth in availability of high quality office space and the demand is expected to match the supply, according to a study by Jones Lang LaSalle’s Asia Pacific Property Digest for the second quarter of 2007.

The trend is expected to continue for the next one year.

However, with the increased availability concentrated in the secondary business districts, rentals are expected to be buoyant in the Central Business Districts.

During the second quarter of 2007 over 380,000 sq ft of space was added with another 3.4 million sq ft expected to be ready in the second half of the year. More than 90 per cent of the addition is going to be in the secondary business districts such as Mount Poonamallee Road, Ambattur and Guindy.

In the suburbs, on the Old Mahabalipuram Road and the GST Road – the peripheral business districts – over 2.8 lakh sq ft of Grade A office space was absorbed. The demand in these areas is driven by IT and ITES companies.

The supply is expected to continue in the third quarter of the year with more than a million sq ft of space nearing completion. A total of about 5.5 million sq ft of office space is to be completed by the year end, according to the report.

Mr Nair said that the rental value in these areas are growing at about 6-10 per cent with Taramani, a hub of IT companies, showing a 10 per cent appreciation in rentals. However, with the large supply expected and a matching demand, rental values would continue in the range of about Rs 38-42 a sq ft per month.

Retail space is one segment where demand is outstripping supply. Over the next two years 3.2 million sq ft of mall space is expected to enter the market. There is a robust pre-leasing activity in the malls under construction and vacancies are not expected to rise. Malls would be 85-90 per cent leased by the time they become operational. The high street markets that are the preferred destinations for retailers are Besant Nagar, TTK Road and Velachery. Lease rentals in these areas are on a par with the prime city malls on Anna Salai, the report said.

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