Research &

Forecast Report
Chennai | Office
January 2015

Developers remain
cautious due to low
absorption
Chennai witnessed improved occupier sentiment as
leasing activities gained momentum during the end of
the year. Overall, transaction volumes decreased and the
office market witnessed about 4.11 million sq ft of office
absorption which is about 24% less than the last year
absorption of 5.43 million sq ft. Occupiers from the IT/
ITeS sectors were the primary contributors to this demand
followed by BFSI and Pharma. Guindy, despite being
the most preferred sub-urban micro market, did not see
much new lease transactions due to very limited vacant
stock available and most of this demand is shifted to OMR
which is emerging as the second most preferred suburb. A
number of large floor plate deals were concluded on this
stretch. For instance, around 0.1 million sq ft was leased
by Tata Consultancy Services and Scope International in
Ramanujam IT SEZ and Futura Tech Park respectively.
Another big ticket deal was concluded by Capegemini
admeasuring 0.07 million sq ft in Prestige Cyber Towers.
Construction continues to remain stagnant and the city
witnessed completion of only 0.8 million sq ft of office
space which is significantly less than the last 5 year average
of about 4 million sq ft. A number of developers deferred
delivery timelines of their under construction projects
in 2014 in view of lower demand. Limited new supply
addition led overall Grade A vacancy levels to decline to
below 20% this year. The available supply of Chennai Grade
A office property market remained at approximately 12.5
million sq ft By submarket, OMR accounted for 47% of the
available supply, followed by Ambattur 24% and CBD 16%.
Approximately 15 million sq ft of grade A office space is
under various stages of construction however, the city will
see limited supply addition as developers continue to defer

City Office Barometer

INDICATORS

2014

2015

Vacancy
Absorption
Construction
Rental Value
Capital Value

Rental Values
MICRO MARKETS

RENTAL
VALUE*

% CHANGE
QoQ
YoY

CBD

60 - 80

0%

0%

Guindy

50 - 60

0%

4%

Ambattur

20 - 30

0%

0%

OMR I**

45 - 60

0%

4%

OMR II & III***

25 - 45

0%

0%

GST Road

35 - 40

0%

0%

*Indicative Grade A rents in INR per sq ft per month

**OMR I (Madhya Kailash Perungudi-Toll gate I)
***OMR II (Thoraipakkam Sholinganallur) & OMR III (Semmencherry
Siruseri)

Research & Forecast Report | January 2015 | Colliers International

New Supply, Absorption And Vacancy Trends

Despite improved demand, rents and capital values for

Grade A office space remained stable across all micromarkets. Rental values remained stable due to tight
corporate budgets and reduced demand for office space.

Trends to watch for in 2015

25%

20%

15%

10%

5%

2010

2011

2012

2013

New Supply (In Mln sqft)

2014

2015F

2016F

Absorption(In Mln sqft)

0%

Vacancy(In %)

Average Rental And Capital Value Trend

12,000

Forecast

105

10,500

90

9,000

75

7,500

60

6,000

2016

2015

2014

1,500

2013

15
2012

3,000

2011

4,500

2010

45
30

Capital Values INR Per sq ft

120

2009

Rental Values INR Per sq ft Per Month

We anticipate renewed demand for office space, led by

the IT/ITeS sector. Guindy and Ambattur being preferred
locations will see greater demand and thus can witness an
upward pressure in rental values. Similarly the OMR until
Perungudi is also a preferred IT/ITeS destination and will be
impacted similarly. By contrast, rents on the farther stretch
of OMR from Sholinganallur to Navalur and Siruseri to
Sipcot are expected to remain stable.

10

2008

supply until substantial demand returns in the market.

Top 5 Transactions of 2014

CLIENT

BUILDING NAME

AREA (SF)

LOCATION

LEASE / SALE

Accenture

Shriram Gateway SEZ

220,000

GST Road

Lease

BNP Paribas

Center Point 2

180,000

Guindy

Lease

TCS

Ramanujam IT SEZ

109,000

OMR

Lease

Citi Bank

Ramanujam IT SEZ

104,000

Taramani

Lease

Astra Zeneca

Ramanujam IT SEZ

104,000

Taramani

Lease

Key Under Construction Projects

BUILDING NAME

DEVELOPER

AREA (SF)

LOCATION

POSSESSION

SP InfoCity, OMR Phase 2

Shapoorji Pallonji Group

1,200,000

OMR

2015

Chennai One (BPO Park) Phase 2 ETL Developers

1,100,000

OMR

2015

Estancia Block B2

469,000

GST Road

2015

L&T & Arun Excello

Source: Colliers International

Notes:
1. Office Market: Prime office properties in Chennai are located in four principal sub-markets: the CBD, SBD (Guindy, Manpakkam,Velachery) and the PBD (Old Mahaballipuram
Road (OMR).
2. Rents/Capital Value: Market average of indicative asking price for Grade A office space.
3. Available Supply: Total Grade A office space being marketed for sale or lease in surveyed quarter.
4. City Barometer: Represents increase, decrease or stable scenario; as compared to previous quarter.
5. All the figures in the report is based on market information as on 25th December 2014.

Research & Forecast Report | January 2015 | Colliers International

Primary Authors:

485
63 countries on
6 continents
United States: 146
Canada: 44
Latin America: 25
186
EMEA: 84

$2.1

billion in
annual revenue

1.46

billion square feet

under management

15,800

professionals

About Colliers International

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Assistant Manager | Research
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Valuation & Advisory Services & Research
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Director | Office Services
Kaushik.reddy@colliers.com
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