APPD Market Report Article


February 22, 2024

Dr Samantak Das, Head of Research, India


INR 76.1


Strong momentum in 4Q pushes demand to a record high

  • A late surge in demand and a strong finish to the year saw Chennai’s gross leasing surpass all previous quarterly figures. As a result, for the full year 2023, total market activity rose to 9.5 million sq ft, marking Chennai’s strongest year yet in terms of occupier activity. Demand in 4Q was driven by GCCs, primarily from the manufacturing/industrial sector and the flex segment.
  • Net absorption in 4Q was higher than the cumulative numbers for the first three quarters of 2023. The available vacancy in Prime buildings was quickly leased and new completions came on-stream with strong pre-commitments, supporting Chennai’s net absorption as it rose to its peak in 2023. Net absorption for 2023 was largely driven by the SBD and OMR for both the pre-toll and post-toll clusters.

The fourth quarter sees the highest new supply in three years

  • New completions totalling 2.54 million sq ft were recorded in 4Q, with DLF Downtown in SBD OMR being a key project that became operational during the quarter. Among the major completions in 4Q, Olympia Pinnacle was fully leased to Smartworks, while DLF Downtown recorded over half of its leasable area being taken up by multiple occupiers, with more deals in the pipeline.
  • For 2023, supply additions were again driven by the tech clusters in SBD, SBD OMR and PBD OMR. For the full year, supply stood at 6.1 million sq ft, again a record for the Chennai office market.

Rents up 2.3% q-o-q

  • Driven by new completions and transactions in key buildings, which continued to occur at increasing rents, Chennai saw rents grow by 2.3% q-o-q.
  • For the full year, rents were up by 4% y-o-y, with maximum growth seen in the PBD OMR submarket, followed by SBD OMR and SBD, all of which are home to quality developments and remain the key demand clusters in the city.

Outlook: GCCs to drive demand with tech making a comeback in 2024

  • Demand momentum looks to remain strong with the city’s manufacturing ecosystem supporting the entry of new players across automotive and industrial production, which are setting up R&D and innovation centres in the city. There is also strong demand from BFSI and flex, while tech demand, especially from third-party outsourcing firms, is likely to make a comeback in 2024.
  • Quality supply is lined up across the SBD and the OMR clusters, where healthy occupier traction in terms of enquiries is currently visible. Some existing occupiers are already looking to expand their footprint and add to their headcount, which should support future space take-up momentum as well. Rents are expected to be driven by recent new completions and vacancies in quality projects.

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

Talk to us 
about real estate markets.