More room for office space in Chennai

The office space in Chennai will see steady demand in the next six months, though new launches in the residential sector will be restricted, according to a report published by Knight Frank, an independent global property consultant.

The study, India Real Estate – Chennai, revealed that the city’s residential market saw a 20-per-cent decline in the number of units launched between January and June 2015, compared to the previous year.

West Chennai, that includes Porur, Ambattur and Sriperumbudur, is considered to be the most affordable and is closely followed by the south that includes Chrompet, Sholinganallur and Guduvancheri.

Around 83 per cent of the units launched in the west and 53 per cent of the units in the south were with an average ticket size of under ₹50 lakhs.

In case of office spaces, the vacancy dropped to 17.9 per cent during the given period and is expected to reduce to 16.4 per cent by the year end.

Though IT/ITeS sectors remains to be the largest occupier in the office market with absorption of 46 per cent, BFSI is also gaining market share at 26 per cent.

The shares of other services and manufacturing sectors have been declining since 2014 beginning.

Peripheral business districts like Sholinganallur saw spurt in demand, as the central and suburban business districts lacked quality office space.

The report estimates that this factor, coupled with lower rentals, has resulted in nearly 80 per cent of the IT/ITeS transactions that took place in this market.

Rentals also show a stable YoY growth of 3 per cent due to steady demand across locations.

Kanchana Krishnan, Director (Chennai), Knight Frank, said 1.2 million sq ft is scheduled for delivery in the Chennai office market and estimated office occupation of 2.4 million sq ft between July and December will give place for further office space development. Though there has not been significant growth, Chennai has performed better than other cities in terms of sale of unsold inventories.

The city sold around 9,000 units in the first half of 2015, and moved to fifth position in terms of sales, whereas it was sixth last year. Chennai is also the third largest in average deal size after Bengaluru and Pune.

The market has grown nearly 40 per cent to almost 35,000 units in the first two quarters of 2015 compared to 25,000 the previous year.

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