APPD Market Report Article


September 4, 2023

Dr Samantak Das, Head of Research, India


INR 74.3


Strong leasing momentum ignites market demand

  • Leasing activity saw a major upsurge, rising to a record high driven by strong demand from tech firms and manufacturing/industrial occupiers. The SBD and SBD OMR submarkets accounted for 78% of all occupier activity recorded during the quarter. Sizeable deals were also recorded in PBD West as well.
  • Net absorption rose to a quarterly record high of 1.76 million sq ft, with previously available vacant spaces in quality buildings sought after by occupiers. Key occupiers that took up space during the quarter included Qualcomm, Hitachi Energy and HDFC.

Healthy completions during the quarter

  • Quality completions adding up to 1.34 million sq ft were completed during the quarter. The supply pipeline looks healthy, supported by developers bringing in quality projects in key submarkets like SBD OMR and PBD OMR, where vacancy levels remain low for quality projects. 
  • Vacancy declined by 80 bps q-o-q to 11.1%.

Rents and capital values remain steady

  • Rents remained largely stable in the quarter even as strong demand is likely to support rent growth in 2H23.
  • Capital values have been holding steady, in line with rents.

Outlook: Demand momentum likely to hold

  • With healthy pre-commitment levels in upcoming quality supply and an adequate demand pipeline, the city is expected to record healthy net absorption numbers for 2023. Demand continues to hold steady from engineering and manufacturing majors, along with tech and financial services captives.
  • An upward trend in rents is likely, primarily driven by the thriving OMR stretch, where high-quality projects are likely to be added at rents that are higher than the prevailing market average.

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

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