M A R K E T B E AT CHENNAI Office Q4 2019
Strong momentum in leasing activity Chennai recorded a significant growth in leasing activity, which spiked by 127% q-o-q with the full year gross leasing activity reaching 5.8 msf by end-2019. This marks a four-year high with demand largely being led by the IT-BPM sector which contributed a 45% share to 5.8 msf YTD GROSS LEASING transaction volumes, followed by flexible workspace operators and captive centres with respective shares of 11% and 10%. Some of the major tenants who leased space in 4Q 2019 included BNP Paribas, Renault-Nissan Technology and Business Centre, J. Ray Mcdermott and Pfizer among others. Healthy pre-leasing volumes of 1.2 msf in Q4 2019 also contributed to the strong leasing activity this quarter. 2.03 msf NEW COMPLETION (2019 YTD) With around 24% of the total Grade A office space coming up in the city in 2020 being already pre-leased and multiple transactions in advanced stages of closure, strong demand momentum is forecasted in the short to medium term in the city. A strong supply pipeline of around 13 msf over the next three years is also likely to play a pivotal role in continuing the momentum going forward. SHARE OF IT SEZs IN GROSS LEASING 64% (Q4 2019) IT –SEZs are major drivers of office demand The city recorded a significant 64% share of its space take-up in the IT-SEZ developments this quarter with the SEZ sunset clause nearing its scheduled deadline by 31 March 2020. The current SEZ stock has a vacancy of 7.5%, with the SEZs in the Suburban South and Peripheral South-West submarkets operating at 99% occupancy levels. With occupiers continuing to show a strong preference for MARKET INDICATORS SEZ spaces to reap the tax incentives and other benefits and with around 40% of the total SEZ supply due for completion in 2020 already OVERALL Q4 2019 pre-committed, the vacancy in SEZs is likely to remain in low single digits and at similar levels in the above-mentioned SEZ corridors.
12-Mo. Suburban South and South West record strong performance Q4 2018 Q4 2019 Forecast Suburban South and South West submarkets continued to record healthy performance levels, accounting for 31% and 38% share respectively, of the gross leasing volumes this quarter. The upcoming Metro Phase II connecting Madhavaram to SIPCOT and Overall 9.6% 9.7% Vacancy Madhavaram to Sholinganallur is likely to further enhance the demand for office space in these submarkets resulting in further strengthening of rents in the coming years. With continued demand momentum and low single digit vacancy rates, these submarkets Weighted Average Net Asking Rents 55.13 58.81 recorded rental growth of around 3.8% and 7.1% y-o-y respectively. Overall Chennai had an impactful year with rental growth of 6.7% (INR/sf/month) y-o-y backed by continuous demand and quality supply.
YTD Net SPACE DEMAND / DELIVERIES OVERALL VACANCY & ASKING RENT Absorption (sf) 2,389,964 1,789,806
6 75.00 14.00% 12.00% 5 60.00 10.00% 4 45.00 8.00% 3 30.00 6.00% 4.00% 2 15.00 2.00% 1 0.00 0.00% 0 2016 2017 2018 2019 2020F WEIGHTED AVERAGE RENTS (INR/SF/MONTH) OVERALL VACANCY(%) NET ABSORPTION (MSF) NEW SUPPLY (MSF) M A R K E T B E AT CHENNAI Office Q4 2019
MARKET STATISTICS
YTD GROSS PLANNED & UNDER GRADE A WTD. AVG. RENT* INVENTORY YTD CONSTRUCTION YTD NET SUBMARKET VACANCY LEASING ACTIVITY# CONSTRUCTION (SF) COMPLETIONS (SF) ABSORPTION (SF) (SF) (SF)^ INR/SF/MO US$/SF/YR EUR/SF/YR
CBD 2,685,809 16.97% 382,805 307,415 409,041 308,000 79.08 13.32 12.02
Off-CBD 544,110 29.18% 39,345 - 61,474 2,022 75 12.63 11.40 South-West 1,1135,740 2.11% 1,565,176 4,332,299 116,000 404,197 75.2 12.66 11.43 North-West 3,232,000 19.01% 334,979 - 360,000 -92,317 45 7.58 6.84 Suburban South 16,450,412 4.07% 1,490,114 2,800,000 - -183,306 73.62 12.40 11.19 Peripheral South 11,882,105 17.33% 1,436,534 1,680,000 1,087,450 1,009,210 50.28 8.47 7.65 Peripheral South-west 4,222,000 15.92% 601,000 3,896,096 - 342,000 59.51 10.02 9.05
TOTALS 50,152,176 9.70% 5,849,953 13,015,810 2,033,965 1,789,806 58.81 $9.90 €8.94
The report highlights Grade A details only. Certain indicators are historically corrected by addition / deletion of older / refurbished projects as per grade A classification and accounting for changes in built-up / leasable area besides adjusting tenant leases to reflect accurate market conditions. Net absorption refers to the incremental new space take-up #YTD gross leasing activity includes pre commitments and term renewals ^Includes planned & under construction projects until 2022 Rohan Sharma *Weighted average asking rental rates for vacant spaces that provide core facility, high-side air conditioning and 100% power back up Director, Research Services Key to submarkets: CBD – Anna Salai, Nungambakkam, RK Salai; Off-CBD – T.Nagar, Alwarpet, Kilpauk, Egmore, Chetpet, Royapettah, Kotturpuram; Peripheral South- Sholinganallur, Thoraipakkam, Navalur, +91 124 4695555 /[email protected] Siruseri, Padur; Suburban South – Perungudi, Taramani, Thiruvanmiyur, Velachery; South West – Guindy, Ashok Nagar, Vadapalani, Manapakkam, Ekkaduthangal; North West – Ambattur, Kapil Kanala Padi, Annanagar, Koyambedu, Arumbakkam; Peripheral South-west – Singaperumalkoil, Tambaram, Guduvanchery, Perungalathur, Pallavaram. Associate Director, Research Services US$ 1 = INR 71.26 € 1 = INR 78.92 +91 40 40405555 /[email protected] Numbers for the fourth quarter are based on market information collected until 15th December 2019 cushmanwakefield.com KEY LEASE TRANSACTIONS Q4 2019
PROPERTY SUBMARKET TENANT SF LEASE TYPE A CUSHMAN & WAKEFIELD RESEARCH PUBLICATION Ascendas Cybervale Peripheral South-West RNTBCI 120,000 Fresh Lease Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for RMZ Millenia Suburban South J.Ray Mcdermott 175,000 Fresh Lease real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 51,000 employees in 400 offices and 70 SIGNIFICANT PROJECTS PLANNED AND UNDER CONSTRUCTION countries. In 2018, the firm had revenue of $8.2 billion across core services of property, facilities and project PROPERTY SUBMARKET MAJOR TENANT SF COMPLETION management, leasing, capital markets, valuation and other Brigade WTC Tower 2 Suburban South NA 800,000 Q2 2020 services.
Bayline Infocity Block 2 Peripheral South NA 1,600,000 Q2 2021 ©2020 Cushman & Wakefield. All rights reserved. The information Embassy Splendid Tech Zone Block 9 Peripheral South West NA 400,000 Q3 2021 contained within this report is gathered from multiple sources believed to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.