APPD Market Report Article

Chennai

November 28, 2022

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

0.0%

INR 136

Rents
Rising

The waning pandemic supports rising momentum in the retail market

  • Organised retail malls and high streets had good traction in the quarter. Prominent malls like Express Avenue, Phoenix Marketcity and Palladium continued to have low vacancy. The Citi Centre mall recorded two transactions by apparel brands, and the apparel sector was also the main demand driver in 3Q22.
  • Overall vacancy stands at 11.2%, while vacancy in the Suburbs submarket stands at 39.5%, with lower-quality malls struggling.

Healthy supply pipeline in the upcoming two years

  • The city lacked new additions/refurbishments in the quarter, and total stock remained at 6.5 million sq ft. An additional 1.13 million sq ft is expected in the near term in the market. The Airport Ozone Mall is expected to hit the Secondary submarket next quarter. Forum Mall by Prestige Group and two projects by Lulu Group are the prominent projects in the supply pipeline from 2024 to 2026.
  • High streets are expected to continue to attract retailers owing to their vibrant nature and competitive rents.

Rents hold steady

  • Rents remained unchanged in all the submarkets. The market momentum pick-up might cause rent escalations in upcoming quarters, but likely only in quality malls. Quality supply in the Suburbs submarket should support rent growth there going forward.
  • Mall rents are likely to remain steady in the short term as recovery takes a stronger hold and retailers continue to negotiate with mall owners, though concessions are no longer being offered by landlords.

Outlook: Market momentum to be driven by quality supply addition

  • Footfall is expected to continue improving as malls adopt the concept of being a family recreational space. New malls and existing good malls will likely continue to be the top priority for new store openings. However, high streets’ retail stores should also add to retail traction, considering the vibrant high street culture in Chennai.
  • Investor sentiment for retail assets will likely remain muted.

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

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