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Chennai Office April 2015:IT/ITeS remains the prime driver with 53% of total absorption.
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1 Research & Forecast Report | April 2015 | Colliers International
IT/ITeS remains the prime driver with 53% of total absorptionChennai 1Q 2015 absorption stood at 0.8 million sq ft as compared to the previous quarters 1.33 million sq ft. The IT/ITES sector accounted for 53% of the total absorption followed by manufacturing at 17% and pharma at 16%. The BFSI, engineering, FMCG, media & entertainment and logistics sectors were also represented in the deals closed during the period. Approximately 50% of total absorption was in the CBD followed by OMR (16%) and Ambattur (11%). Notable transactions include the Income Tax Department taking the entire BSNL Building of 0.19 million sq ft located in the CBD. Apart from this, Ford took 0.06 million sq ft in SP Infocity at OMR and Bank Bazaar took 0.05 million sq ft in India Bulls located at Ambattur.
Cautious market sentiments restricted the new supply to only 0.40 million sq ft. Projects contributing this supply were Lalah Tower (0.28 million sq ft) by Ramaniyam on Nelson Manickam Road; Sri Balaji Complex (0.06 million sq ft) by Shanthi Builders at Royapettah; and AGR Platina (0.05 million sq ft) by an independent developer at Ekkaduthangal. The total available supply for lease / fit-out stood at 10.7 million sq ft. By micro-market, OMR (IT corridor) accounted for 34% of this total available supply, followed by Ambattur 28% and the CBD 27%. No new projects / parts of projects were launched in Chennai during the quarter. Lack of new completed supply has led to a decline in vacancy rates especially on the OMR stretch.
Weak absorption continued to keep pressure on rents and capital values in 1Q 2015, resulting in a marginal decline by 1% in OMR I (Madhya Kailash - Perungudi - Toll Gate I). All
City Office Barometer
Research & Forecast Report
Chennai | OfficeApril 2015
Rental Values
*Indicative Grade A rents in INR per SF per month**OMR I (Madhya Kailash Perungudi- Toll gate I) ***OMR II (Thoraipakkam Sholinganallur) & OMR III (Semmencherry Siruseri)
MICRO MARKETS RENTALVALUE*% CHANGE
QoQ YoY
CBD 60 - 80 0% 0%
Guindy 50 - 60 0% 4%
Ambattur 20 - 30 0% 0%
OMR I** 45 - 60 -1% 1%
OMR II & III*** 25 - 45 0% 0%
GST Road 35 - 40 0% 0%
INDICATORS 1Q 2015 2Q 2015 F
Vacancy
Absorption
Construction
Rental Value
Capital Value
2 Research & Forecast Report | April 2015 | Colliers International
other micro-markets remained stable; this is also attributed to the huge vacant stock, especially on the OMR stretch.
During this quarter, the Chennai Government has allocated INR500 and INR750 crore for the Chennai Mega City Development Mission and the Integrated Urban Development Mission, respectively for 2015 - 2016. Apart from this, the sum of INR420 crore has been allocated for the Tamil Nadu Urban Road Infrastructure Fund. Civic bodies are targeting the overall infrastructure development of the city through these funds.
Colliers View
Th e demand for offi ce space is expected to gain further momentum in line with the revival in economic growth projected for the medium term. However, the high vacancy level, coupled with upcoming supply is likely to restrain the rent growth particularly in micro-markets like Th oraipakkam, Sholinganallur and Semmenchery to Siruseri over the next few quarters.
Top 5 Transactions of the Quarter
Key Under Construction Projects
CLIENT BUILDING NAME AREA (SF) LOCATION LEASE / SALE
Income Tax Department BSNL Buidling 197,000 CBD Lease
Ford SP Infocity 69,000 Old Mahabalipuram Road Lease
Bank Bazaar India Bulls 50,000 Ambattur Lease
Citi Bank TRIL 44,000 Old Mahabalipuram Road Lease
Vasan Eye care Hospital Harini Towers 40,000 CBD Lease
BUILDING NAME DEVELOPER AREA (SF) LOCATION POSSESSION
SP InfoCity, OMR Phase 2 Shapoorji Pallonji Group 1,200,000 Old Mahabalipuram Road 2015
Chennai One (BPO Park) Phase 2 ETL Developers 1,100,000 Old Mahabalipuram Road 2015
Estancia Block B2 L&T & Arun Excello 469,000 GST Road 2015
Notes:
1. Offi ce Market: Prime offi ce properties in Chennai are located in four principal sub-markets: the CBD, SBD (Guindy, Manpakkam,Velachery) and the PBD (Old Mahaballipuram
Road (OMR).
2. Rents/Capital Value: Market average of indicative asking price for Grade A offi ce space.
3. Available Supply: Total Grade A offi ce space being marketed for sale or lease in surveyed quarter.
4. City Barometer: Represents increase, decrease or stable scenario; as compared to previous quarter.
5. All the fi gures in the report is based on market information as on 25th March 2015.
Quarter Wise Absorption
Average Rental And Capital Value Trend
105
9,000
10,500
7,500
6,000
4,500
3,000
1,500
0
90
75
60
45
15
30
0
0.4
0.8
1.2
1.6
2.0
2.4
0
1Q 2
013
2Q 2
013
3Q 2
013
4Q 2
013
1Q 2
014
2Q 2
014
3Q 2
014
4Q 2
014
1Q 2
015
Mill
ion
Sq.
ftRe
ntal
Val
ues
INR
Per
Sq
Ft P
er M
onth
Capi
tal V
alue
s IN
R P
er S
q.ft
1Q 2
008
1Q 2
009
1Q 2
010
1Q 2
011
1Q 2
012
1Q 2
013
1Q 2
014
1Q 2
015
1Q 2
016F
1Q 2
017F
Forecast
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