APPD Market Report Article


May 26, 2024

Dr Samantak Das, Head of Research, India


INR 76.9


Strong demand momentum continues in 1Q

  • Chennai’s office market recorded its strongest ever first quarter leasing performance with a gross leasing volume of 2.67 million sq ft. The market momentum was driven by the tech sector, which led with the largest share, taking up 57%, followed by the BFSI segment with a 16% share.
  • With few completions during the quarter, net absorption was at 0.67 million sq ft, up by 7.2% y-o-y. The OMR belt contributed the most of the quarterly net absorption, followed by the CBD, where small office format requirements were quite active.

Lowest completions in seven quarters

  • New supply addition in 1Q was at a seven-quarter low of 0.65 million sq ft, headlined by the CBD and SBD OMR.
  • Vacancy fell by 10 bps q-o-q and reached a nine-quarter low, with all premium assets operating at high occupancy levels.

Rents and capital values up q-o-q

  • Rents on an overall basis rose by 1.1% q-o-q, driven by stronger growth in the PBD West submarket, which also headlined a significant rent increase from a single project. The corridors of the SBD and the OMR belt also saw rent increases of around 1% q-o-q.
  • Capital values rose in sync with rent growth. Key assets were already owned or invested in by institutional players and demanded high rents, with single-digit vacancy levels prevailing among them.

Outlook: Strong occupier interest to support forecast absorption

  • Ongoing transactions in advanced stages for available vacancies in quality assets as well as pre-leasing in select upcoming projects, coupled with occupier enquiries, signal that demand momentum is expected to continue.
  • Tech, engineering and BFSI GCC occupiers, along with flex operators, are key drivers of space demand in the office corridors. Strong interest in the SBD and the OMR belt is expected to continue. Rent growth is likely to be driven by the same corridors with existing and upcoming quality assets driving the trend.

Note: Chennai Office refers to Chennai's overall Grade A office market.

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