M A R K E T B E AT

CHENNAI
Industrial Q2 2020

Manufacturing and Warehousing Suffer a Temporary Disruption due to COVID-19

The large-scale supply chain disruptions in the wake of COVID-19 led to a slowdown in Chennai’s manufacturing operations and even demand for warehousing
facilities in H1 2020 declined by 95% when compared to the half yearly absorption in H2 2019. With the lockdown in place and labour movement restricted,
manufacturing companies in the city halted their expansion plans and focused on operating their production facilities with minimal labour as per the regulations
HALF YEARLY GROWTH IN INDUSTRIAL
4% RENT IN ORAGADAM
specified by the government. In the early months of the year, a few warehousing transactions from the e-commerce, logistics and automotive sectors were recorded in
the Oragadam, Thirumazhisai and Sholavaram submarkets. Most of the transactions, which were in the last leg of discussion during this period, were delayed due to
the lockdown with stakeholders adopting a cautious approach amid rising business uncertainty. Addition of new supply of warehousing facilities also got affected with
the construction activity coming to a complete halt. However, Chennai’s status as a leading industrial centre of the country means that the city is likely to attract
3.85% Y-O-Y GROWTH IN WAREHOUSING
RENT IN POONAMALLEE
industrial and manufacturing investments over the medium to long term. The current disruption is, therefore, likely to be a short-term phenomenon and demand for
large warehousing space could witness healthy recovery from early 2021. Over the next few quarters, steady growth in demand for warehousing space is expected in
the Mannur – Mappedu cluster, with substantial enquiries from e-commerce, FMCG and pharmaceutical occupiers.

0.16 msf SPACE LEASED BY AMAZON Marginal drop in industrial rentals in H1 2020
Due to the sharp, albeit short-term slowdown in demand for warehousing spaces following the lockdown, industrial and warehousing rentals declined by 1.76% and
0.91% respectively on average in H1’20 on compared to H2’19. However, different corridors have seen varying trends in terms of rental movement. The last six months
have been slow and marginal rent correction has been driven by occupier negotiations and landlord flexibility. Warehousing rentals dropped by 0.2% y-o-y in the
Ambattur, Manali and Maraimalai Nagar clusters, while combined manufacturing and warehousing rentals in the Manali, Mannur and Maraimalai Nagar clusters
witnessed a drop of around 4-5%. On the other hand, Poonamallee, Oragadam and Irungattukottai in the warehousing sector and Gummidipoondi, in the manufacturing
sector witnessed a half yearly rise of around 4-7% in rents. Industrial rents in Chennai are expected to stabilize by early 2021 with an expected recovery in
ECONOMIC INDICATORS Q2 2020 manufacturing activity. In fact, rents may also increase in the major industrial corridors if supply does not keep pace with higher demand from logistics and
manufacturing companies.
2021
2019 2020
Forecast Government backs the industrial sector with a slew of initiatives
In recent months, the Tamil Nadu government has taken a number of steps to facilitate industrial investments, which will position Chennai as an attractive industrial
GDP Growth 4.2% -3.0% 6.2% centre for global investors. For instance, the government has announced an Active Pharmaceutical Ingredients (API) Park with an investment of around INR 770 crore.
The new 650 acre API Park, which will manufacture bulk drugs for finished dosages, will come up in Cheyyar SIPCOT with amenities such as modern warehouses,
R&D centres and waste treatment facilities. This is likely to boost demand for warehousing spaces substantially over the medium to long term and incentivize
CPI Growth 3.4% 4.1% 4.2% investments by global PE funds. The planned API Park is also expected to curb imports of critical pharmaceutical ingredients and facilitate development of local
manufacturing expertise. The state government has also signed 17 MoUs with investors for projects such as manufacturing of commercial vehicles, windmill
Consumer equipment, semiconductor chips, etc. Dedicated housing facilities for employees in all 20 SIPCOT Parks and other industrial clusters such as Ambur and Vaniyambadi
5.0% -0.5% 5.8%
Spending is a part of a new industrial policy which is likely to be unveiled in the next few months. We expect that the proposed investments, supported by enabling industrial
regulations, will drive steady growth in Chennai’s industrial sector, especially for modern warehousing facilities, over the long term.
Govt. Final
Expenditure 13.2% 12.8% 11.5% INDUSTRIAL RENT / Y-O-Y GROWTH WAREHOUSING RENT / Y-O-Y GROWTH
Growth
30 10% 30 10%
25 25
Source: Oxford Economics, IMF, RBI 5% 5%
20 20
15 0% 15 0%
10 10
-5% -5%
5 5
0 -10% 0 -10%

INDUSTRIAL RENT (H1 2020) INDUSTRIAL RENT Y-o-Y GROWTH WAREHOUSING RENT (H1 2020) WAREHOUSING RENT Y-o-Y GROWTH
M A R K E T B E AT

CHENNAI
Industrial Q2 2020

LAND RATES – JUNE 2020

INR US$ EURO Y-O-Y
SUBMARKET
MN/ACRE MN/ACRE MN/ACRE Change
Ambattur 180 2.12 2.11 13%
Poonamallee 100 1.32 1.17 0%
Sriperumbudur – Oragadam 25 0.32 0.29 4%
Irungattukottai 25 0.33 0.29 0%
Madhavaram 75 0.93 0.88 25%
Gummidipoondi 15 0.17 0.16 0%
Periyapalayam road 16 0.21 0.20 0%
Manali 36 0.46 0.44 125%
Mannur 14 0.17 0.16 8%
Maraimalai Nagar 45 0.60 0.57 0%

Percentage growth are in local currency; Y-O-Y – Year on Year

Conversion Rate: US$1= INR 75.6 and Euro 1 = INR 85.3
* Historical land rates for certain submarkets have been revised.
Rohan Sharma
SIGNIFICANT TRANSACTIONS H1 2020 Director, Research Services
+91 124 4695555 / rohan.sharma1@cushwake.com
Buyer/Lessee Seller/Lessor Type Submarket Area (sf)
Kapil Kanala
Aptive Sanlandmark Warehouse Oragadam 70,000 Associate Director, Research Services
Warehouse
+91 40 40405555 / kapil.kanala@ap.cushwake.com
Amazon Olympia Thirumazhisai 1,60,000

Gati Arihanth Warehouse Sholavaram 1,00,000

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