Real Estate Rentals on the Rise in Chennai with Luxury and Comfort

Shortage in supply of commercial space has resulted in decrease consumption and higher rentals property in Chennai. For the period from January to October this year, an agreement for nearly 3.3 million sq. ft. has been signed, down from 3.7 million a year ago. Rentals have, however, shot up by almost 10 percent year-on-year. Real Estate market of Chennai is driven largely by captive back office operations of large corporations, mostly in the financial assistance vertical. In any given year, the city consumes nearly 4.3 million sq. ft. of office space.

The interest in the quality of commercial space remains high, but we are disabled by the absence of supply. Several new and existing real estate players have signed up authorizations for development here, while we wait for supply to get in.

With quality commercial properties supplies hitting the nadir, rentals are rising. "Between Q2 (April-June) and Q3 (July-September) there is a five percent increase in rentals," said V S Sridhar, managing director, Chennai real estate market, Cushman & Wakefield, international property consultants. "The important part of the story is the net consumption which is positive," he said. Net use is the new deals signed instead of the same client moving from one location to another. "70 percent of all deals this year are current sales.

Among the top deals in the July-September quarter contains GE signing up for two lakh sqft. In Ramanujam City, World Bank, and e-tailer Amazon signing up for 70,000square feet each at SP Info City in Perungudi and Fresh desk adding another 80,000sqft at SP Info City.

"Certain micro markets are witnessing real recognition in rentals. For example, for IT sector in Sholinganalur and beyond rentals are now nearly 28 a sqft. From 24 earlier," said the director, Chennai, at Knight Frank India, property consultants, Kanchana Krishnan, "The pipeline is strong. Deals will get engaged when fresh supplies start coming in," she added. An indicative rental at OMR (up to toll plaza) which was between 50 to 65 has now risen to a minimum 60. Central business district rents have increased to nearly 80 a square foot from 75 a square foot, industry sources said. At the current run rate, property in Chennai industry sources guided to a 4.5 million sq ft of consumption for 2016 compared to 5.2 million sq. ft. in 2015.

The luxury market seems to be on an upswing, as indicated in the data shared by Magicbricks. Chennaites are warming towards the luxury segment and catering to this rising consumer demand; the market has witnessed a boost in the domestic supply as well. The buyers are interested in not only participating as end-users but are also looking for leasing options. Luxury is defined by its location, the space being provided, specifications of the property, amenities being offered and the brand. An in-depth study reveals that the Chennai market has seen a 3.4 percent growth in the luxury category. It is important to mention that though many upscale projects are often discussed under the category, there are distinctions amongst them.

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