Tech occupiers drive market activity during the quarter

• The Chennai office market witnessed healthy leasing momentum, with 1.4 million sq ft of gross leasing activity in the quarter. Despite early signs of occupier decision-making being impacted by global headwinds, the city’s office market continued to perform well, with net absorption in Q4 rising by two times q-o-q, the highest in three years.
• SBD OMR and SBD submarkets saw healthy leasing traction, together constituting 60% of the leasing activity. Tech occupiers were the most active during the quarter, along with the healthcare-biotech and telecom segments, which accounted for 64% of activity.

Supply additions in PBD OMR and SBD OMR

• A total of 1.67 million sq ft was added to the city’s Grade A stock in the quarter. The major supply additions were Embassy Splendid Tech Zone Block 9, Spero Primus 2 and Futura Tech Park Tower C in PBD OMR and SBD OMR submarkets.
• Occupier demand around PBD OMR witnessed an uptick, and vacancy in the submarket dropped to 11.9%. SBD OMR and CBD continued to have tight vacancy levels. However, the overall vacancy rate in the city rose 37 bps to 10.67% q-o-q.

Rents went up marginally by 1% q-o-q

• The overall rent growth is largely attributable to quality completions in the quarter. Landlords of new completions and quality projects were confident enough to quote higher rents due to sustained leasing momentum. The PBD OMR submarket is gaining more occupier traction and saw a 2% rise in rents q-o-q.
• The rents in CBD and SBD OMR, where vacancy levels are tight, have also risen by 1% and 5% y-o-y, respectively.

Outlook: Healthy demand outlook supported by ongoing enquiries

• With the return-to-work trend gaining momentum and office occupancy slated to rise further, occupiers’ real estate planning is on sound footing. Despite economic headwinds that are likely to delay decision-making, pre-commitments and ongoing deals show confidence in the city’s office market. With the revamping of the SEZ bill on the cards, greater traction is expected for such projects.
• However, given the supply pipeline and occupier relocation/consolidation plans, vacancy is likely to remain on the rise for the next two to three quarters. As the city is a manufacturing hub, this segment is likely to bridge the gap as the tech segment slows down. Flex is another segment that is gaining momentum as it becomes an integral part of portfolio strategies for all major corporates.