APPD Market Report Article
Chennai
February 21, 2025
Net absorption up by 102% q-o-q
- Gross leasing increased by 20% q-o-q due to robust occupier activity, driving the office market towards a strong finish for the year. In H2 2024, gross leasing was 4.0 million sq ft, second only to the peak numbers observed for the same period in the previous year.
- Demand was driven by co-working providers with 26.3%, followed by BFSI with 22.4% and IT/ITeS with 20.1%. Net absorption jumped by 102% q-o-q, with the SBD submarket accounting for 60% of Q4 figures.
Completions in Q4 total 1.1 million sq ft
- Two new projects, L&T Innovation Campus – Tower 2 and TIDEL Park Pattabiram, in the SBD and PBD West submarkets, respectively, were completed in Q4, adding 1.1 million sq ft to the city’s office Grade A stock. The former was 100% pre-leased.
- A total of 3.5 million sq ft of new supply entered the city in 2024, down by 37.6% y-o-y. City vacancy rates dropped by 140 bps q-o-q to 8.0% in Q4 2024, the lowest ever.
Rents up by 3.8% y-o-y
- The highest rent growth in 2024 was observed in PBD West at 14.8% y-o-y, with declining vacancy in a key asset driving up rents. In the SBD OMR, rents rose by 7.5% y-o-y. On a q-o-q basis, rents were mostly unchanged.
- Capital values were also relatively stable q-o-q, while rising in tandem with rents on a y-o-y basis. Yields, as a result, remained unchanged as well.
Outlook: Strong demand will sustain high interest in premium assets
- Strong demand, coupled with existing pre-commitments and ongoing deals, is anticipated to result in healthy net absorption over the next 12 to 18 months. The most active occupiers are in the IT, flex and BFSI sectors, and demand levels are expected to remain robust.
- Over the next 12 to 18 months, 7 million sq ft of new supply is planned, with PBD OMR and SBD submarkets accounting for the major share. While SBD and SBD OMR will remain office hotspots, PBD OMR is expected to see significantly higher demand in the coming quarters.
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