Chennai office space absorption to be lower in 13

The city would see a gross absorption of 3.6 mn sft in 2013 as against the average absorption level of around 4 mn sft every year

The office space absorption in Chennai, which has seen a slow down in absorption the first half of this year, would see a gross absorption of 3.6 million sft in 2013 as against the average absorption level of around 4 million sft every year, according to experts from real estate consultant Jones Lang LaSalle (JLL).

The experts also said the residential real estate sector in the city has seen developers buying Rs 1,500 crore worth of prime land parcels during the last six months.

The first half of the year has marked a below average absorption of around one million sft. "However, with quite a few big transactions in the pipeline, we still expect the second half of 2013 to compensate for the first halfs slowdown," said Alastair Hughes, CEO - Asia Pacific, JLL.

The office space demand has been focused on certain areas, while other areas has not seen much uptake by the customers. Though the office space vacancy is currently around 25 per cent, the vacancy levels are thin in preferred locations such as Guindy, pre-toll OMR and Mount-Poonamallee Road.

"Rents in these preferred locations rose by 5-10 per cent during the last year. Some of these locations are also seeing increased supply of office spaces," said Badal Yagnik, managing director Chennai and Coimbatore, JLL India.

The demand for grade-A office stock in Chennai has witnessed a growth from 3.6 million sft in 2003 to 51.2 million sft in 2013 and the market is mainly driven by the IT and IT-enabled services sector, which saw major developers like DLF, Shapoorji Pallonji, Tata Realty and Prestige.