APPD Market Report Article

Chennai

August 26, 2022

Dr Samantak Das, Head of Research, India & Sri Lanka

0.0%

INR 136

Rents
Rising

Demand for high streets greatly outperforms that of malls

  • The vibrant high street culture is witnessing increased retailer traction in Chennai even as mall activity continues to languish. While mall footfall has recovered to a large extent, retailer demand seems to be more inclined towards prominent high streets rather than average mall developments.
  • No major transaction activity was recorded in prominent malls except one in Express Avenue which remains at high occupancy levels. Some pre-commitment activity was present at one of the upcoming malls. The overall vacancy rate remains stable at 11.6%, with the secondary submarket having the lowest rate at 4.4%.

No supply additions in the quarter

  • No new additions/refurbishments were recorded in the quarter, and total stock remains at 6.5 million sq ft. With the completion of Airport Zone Mall by Olympia Group in the secondary market by the end of the year, an additional 0.25 million sq ft will be added to stock.
  • The supply pipeline in the medium term remains weak as high street culture holds strong in Chennai.

Rents remain stable

  • Rents remained stable in the quarter across all submarkets as developers continue to support retailers during this phase, although incentives are no longer available and most commercial terms have reverted to pre-COVID levels.
  • Rents in malls are likely to remain steady in the short term as recovery takes hold and retailers continue to negotiate with mall owners.

Outlook: Improved footfall to drive business sentiment

  • Steady growth in footfall should drive a strong recovery in malls as increased business supports retailer growth plans. While high streets will likely continue to rule the roost, new quality malls and existing ones will remain high on retailer lists for new store openings, especially in under-served corridors.
  • Rents and capital values are expected to remain stable and investment sentiment is expected to continue remaining low for retail assets.

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

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