APPD Market Report Article

Chennai

May 31, 2022

0.0%

INR 136

Rents
Rising

Net absorption drops by 33% q-o-q

  • When compared to other asset classes, the recovery of mall leasing activity remains slow in Chennai. The festive season, which was expected to support an improvement in footfall and retailer business during the first month of the quarter, was adversely impacted due to the spread of Omicron and a subsequent lockdown.
  • Chennai has always been known for its vibrant high street culture. Many retailers are now aggressively expanding their footprint in high streets, aided by the current competitive rental landscape.

No completions recorded in the quarter

  • No new malls became operational in 1Q22.
  • Supply pipeline looks weak until end-2022, with most proposed malls yet to break ground and many planned malls being shelved or put on hold.

Rents and capital values remain largely stable

  • Rents remained largely stable across all malls. However, due to the increasing vacancy levels in the past few quarters, mall developers remain flexible and continue to offer some sort of discounts on a case-by-case basis.
  • Rents in high streets also remained largely stable.

Outlook: Demand for mall space set to improve at a gradual pace

  • As the state government has lifted all COVID-19-related restrictions, the footfall in malls is expected to improve, thereby boosting retailer confidence for new store openings.
  • Chennai retail is likely to have a balanced co-existence in the online and brick-and-mortar retail formats, with physical retail staying relevant as it serves the bigger purpose of supporting family entertainment and social gatherings.

Note: Chennai Retail refers to Chennai's overall prime retail market.

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