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MARKETBEAT

OFFICE SNAPSHOT
CHENNAI, INDIA

Q3 2014

A Cushman & Wakefield Research Publication

ECONOMIC OVERVIEW
The economy rebounded with green
shoots of recovery. The Indian economy
grew by 5.7% during the first quarter of
FY201415, the highest growth recorded in
nine quarters. The construction sector grew
by 4.7%, significantly higher compared to the 0.7% growth during the
previous quarter, due to increased activity in the real estate and
infrastructure sectors.
Reduction in Current Account Deficit (CAD). Indias CAD
narrowed to 1.7% of its GDP during the first quarter of FY201415
against 4.8% during the same period a year ago. In August 2014, the
Reserve Bank of India (RBI) maintained status quo on key policy
rates.

OUTLOOK
Higher infusion of future supply. Almost 760,000 sf of supply is
expected to be operational in the next quarter, mainly in the CBD,
Peripheral-RGS and Peripheral-GST, and 48% of the supply will
comprise of Grade A IT spaces.
Falling vacancy levels. Leasing levels may improve during the next
quarter, which might exert a downward pressure on vacancies,
mainly for Grade A spaces in the CBD, Suburban-RGS, and Southwest.
STATS ON THE GO (GRADE A)
Q3 2013

Q3 2014

Overall Vacancy

19.6%

14.0%

Y-O-Y
CHANGE
-5.6%

GDP is anticipated to grow at 5.56% in FY201415. With


revived business sentiment supported by improving macroeconomic indicators, the Indian economy is expected to register a
growth of 5.56% in FY2015.

Net Asking Rents


(INR/sf/month)
YTD Net Absorption (sf)

39.75

40.32

1.44%

1,958,400

1,811,500

-7.50%

OFFICE MARKET OVERVIEW

NET ASKING RENTAL VS. VACANCY RATES (GRADE A)

INR/sf/month

20

20%

10

10%

0
2011

2012

2013

Q1
2014

Q2
2014

NET ASKING RENTAL RATE

Q3
2014

VACANCY RATE

PRE-COMMITMENT VS NET ABSORPTION (GRADE A)


5,000
4,000
3,000

For more information, contact:


Siddhart Goel
Director- Research Services, India
Tel: +91 22 6657 5555
siddhart.goel@ap.cushwake.com

0
2010

2011

PRE-COMMITMENT

2012

2013

50

1,811

2,657

150

3,711

600

1,000

4,559

2,000

Rentals witnessed a slight uptick. In the wake of higher vacancy


levels in the CBD, Grade A rentals declined by 6% on a quarter-onquarter basis. Improving demand from occupiers for Grade A spaces
in South-west locations increased rentals by 7% on a quarter-onquarter basis. Overall, the weighted average rentals witnessed a
marginal uptick of 2% for Grade A spaces.

Cushman & Wakefield (India) Pvt Ltd


Paramount Plaza, 5th Floor
#7A/22Nungambakkam High Road
Chennai 600 034
+91 44 4299 5555
www.cushmanwakefield.co.in

0%
2010

290

Marginal decline in vacancy rates. Lower leasing activity


coupled with limited supply led overall Grade A vacancy levels to
decline by 0.8 percentage point this quarter.

30%

30

3,109

Net absorption declined by half. Corporate houses continued


to expand, albeit at a slow pace, which resulted in net absorption
levels declining by almost half as compared to the last quarter. Of
the total Grade A net absorption of 656,000 sf, the CBD accounted
for 17% as occupiers took advantage of competitive rentals offered
by some landlords in the wake of higher vacancies in this submarket.
Almost 50,000 sf of Grade A space was pre-committed during this
quarter by companies in the IT-ITeS sector, which is expected to be
absorbed by the first quarter of next year.

40%

40

sf (thousands)

New supply concentrated in the CBD. During the third


quarter of 2014, Chennai witnessed new supply of 299,000 square
feet (sf), a decline of 13% over the previous quarter. Of the total
new supply, 86% constituted Grade A spaces, which became
available in the CBD. Some commercial spaces under construction
(around 108,000 sf) have deferred delivery timelines due to slower
construction pace.

12 MONTH
FORECAST

YTD 2014

NET ABSORPTION

The report contains information available to the public and has been relied upon
by Cushman & Wakefield on the basis that it is accurate and complete. Cushman
& Wakefield accepts no responsibility if this should prove not to be the case. No
warranty or representation, express or implied, is made to the accuracy or
completeness of the information contained herein, and same is subject to errors,
omissions, change of price, rental or other conditions, withdrawal without notice,
and to any special listing conditions imposed by our principals.
2014 Cushman & Wakefield, Inc. All rights reserved.

CHENNAI SELECT MICRO MARKET STATISTICS


SUBMARKET

ALL GRADES**
CBD - Anna Salai, RK
Salai***
Off-CBD - T. Nagar,
Alwarpet***
South-West
North-West
Suburban-Rajiv Gandhi
Salai#
Peripheral-Rajiv
Gandhi Salai
Peripheral-GST

INVENTORY

OVERALL
VACANCY
RATE

YTD LEASING
ACTIVITY

UNDER
CONSTRUCTION

YTD
CONSTRUCTION
COMPLETIONS

YTD OVERALL
NET ABSORPTION

WTD. AVG RENTAL RATE


INR
US$
SF/MONTH*
SF/YR

EURO
SF/YR

2Q 14

3Q 14

3Q 14*

3Q 14*

14,691,100

11.7%

490,600

412,000

286,000

348,100

59.51

59.07

$11.73

9.14

9,723,900

9.5%

58,500

411,900

30,800

400

53.62

53.47

$10.57

8.24

12,777,600

6.9%

541,800

1,188,400

150,500

249,900

52.21

54.48

$10.30

8.02

4,936,900

39.1%

154,500

43,800

154,500

28.11

29.02

$5.54

4.32

17,215,100

8.6%

1,343,300

2,349,000

126,000

1,041,900

46.01

45.49

$9.07

7.07

9,775,200

24.0%

264,200

801,000

253,300

29.77

29.24

$5.87

4.57

2,943,800

11.1%

228,900

170,000

220,000

-30,000

39.39

43.59

$7.77

6.05

72,063,600

13.3%

3,081,800

5,376,100

813,300

2,018,100

41.07

41.70

$8.10

6.31

CBD-Anna Salai, RK
Salai

1,948,800

32.1%

363,400

251,200

259,000

326,200

74.22

69.57

$14.64

11.40

Off-CBD- T. Nagar,
Alwarpet

340,000

0.0%

62.73

62.73

$12.37

9.64

TOTALS
Grade A

South-West

9,126,400

5.6%

375,200

1,102,500

132,500

192,700

53.42

57.12

$10.53

8.21

North-West

2,872,000

49.6%

123,500

123,500

28.77

29.51

$5.67

4.42

14,079,800

6.1%

1,213,200

2,250,000

945,700

50.05

50.23

$9.87

7.69

7,690,400

22.3%

264,200

801,000

253,300

30.36

29.68

$5.99

4.66

Suburban-Rajiv Gandhi
Salai#
Peripheral-Rajiv
Gandhi Salai
Peripheral-GST
TOTALS

2,650,000

10.8%

228,900

170,000

220,000

-30,000

40.00

44.79

$7.89

6.15

38,707,400

14.0%

2,568,400

4,574,700

611,500

1,811,400

39.42

40.32

$7.77

6.06

* Reflect weighted average, warm shell asking rental rates that includes core facility, high-side air conditioning and 100% power back-up
Suburban-Guindy, Suburban-Ambattur and Suburban-Perungudi Taramani are now renamed as South-West, North-West and Suburban-Rajiv Gandhi Salai respectively
** All Grades - includes all Grade A and select properties of other grades in prime office micro markets
Conversion rate: US$ 1 = INR 60.85 and Euro 1 = INR 78.11
Net absorption refers to the incremental new space take-up; renewals not included in leasing activity statistics
IT-ITeS denotes Information Technology and Information Technology enabled Services
Numbers for the third quarter are based on market information collected until 10th September 2014

MARKET HIGHLIGHTS
Significant Q3 2014 Lease Transactions

SUBMARKET

TENANT

BUILDING GRADE

Futura IT Park

Peripheral-RGS

Scope International

100,000

DLF IT Park

South West

Thirdware

56,000

Significant Q3 2014 Construction Completions

SUBMARKET

TENANT

BUILDING GRADE

NA

ETA Mount Central

Significant Projects Under Construction

CBD

SQUARE FEET
259,000

TENANT

COMPLETION DATE

Purvankara Primus

Peripheral-RGS

NA

Q4 2014

185,000

AGR Platina

South West

NA

Q1 2015

54,300

Cushman & Wakefield (India) Pvt Ltd


Paramount Plaza, 5th Floor
#7A/22Nungambakkam High Road
Chennai 600 034
+91 44 4299 5555
www.cushmanwakefield.co.in

SUBMARKET

SQUARE FEET

For more information, contact:


Siddhart Goel
Director- Research Services, India
Tel: +91 22 6657 5555
siddhart.goel@ap.cushwake.com

SQUARE FEET

The report contains information available to the public and has been relied upon
by Cushman & Wakefield on the basis that it is accurate and complete. Cushman
& Wakefield accepts no responsibility if this should prove not to be the case. No
warranty or representation, express or implied, is made to the accuracy or
completeness of the information contained herein, and same is subject to errors,
omissions, change of price, rental or other conditions, withdrawal without notice,
and to any special listing conditions imposed by our principals.
2014 Cushman & Wakefield, Inc. All rights reserved.