Office market poised for quantum leap

Chennai’s office market is poised for a major thrust in supply level in the coming years.

The absorption of office space this year is likely to touch 6 million sqft, the highest absorption recorded in the last five years, according to CBRE sources.

However, the challenge is non availability of adequate supply level in the market in 2017.

The projects that will ensure significant supply level include SNP Infrastructure Pvt Ltd. (a joint venture with Embassy group) on Thoraipakkam-Pallavaram radial road at 4.5 million sqft office space, Brigade group’s World Trade Centre on OMR, DLF’s plan to inject 4.5 million sqft near Ascendas and RMZ Corp’s 1.6 million sqft office supply on Poonamallee High Road.

“The new supply level will take at least 24-36 months to materialise but in the short term the mismatch in demand-supply level will lead to increase in rentals”, said CBRE sources who closed the SNP Infrastructure deal with the Embassy group.

Warehousing mart scenario

Land allotment rates in the Vallam-Vadagal industrial park in Chennai rose 25 percent year-on-year. Increased space occupancy in Sri City, the largest industrial park in the TADA industrial area led to 10.0 percent increase in land rates y-o-y. Land rates for other submarkets largely remained stable, according to Cushman & Wakefield survey.

Industrial shed rentals dipped 4-6 percent due to muted transaction activity in select submarkets like Ambattur, Sriperumbudur, Oragadam and Red Hills, while rates remained stable in other submarkets. Rentals for warehouses remained stable in all submarkets except Maraimalai Nagar, which recorded 10 percent increase y-o-y. The increase can largely be attributed to the robust demand from the automobile segment, and limited supply in the area.

The central government’s Make in India campaign is expected to figure well for the industrial segment with investment plans expected from both domestic and international firms. Proposed developments like the Chennai-Bengaluru industrial corridor, Visakhapatnam-Chennai industrial corridor and Chennai-Kolkata industrial corridor will provide good thrusts to the state’s industrial sector in the long run. The rising demand for serviced industrial land parcels may increase industrial land values in select submarkets along NH-5.

Road investment at US$ 44.73 billion

As road lengths increase, connectivity improves across a wider geography thereby attracting new project launches at lower price points. This can reduce prices in urban agglomerations. If more roads are constructed in rural areas, price rise in urban cities could be restricted to moderate levels. This would help increase affordable housing projects near the metros. Not surprisingly, there was a strong inverse correlation between the two indicators, according to a JLL survey.

The Indian government plans to invest $ 44.73 billion for developing 35,000 km of roads across the country, of which 21,000 km will be economic corridors and 14,000 km will be feeder routes. This is expected to improve freight movement, ease traffic bottlenecks and improve inter-city connectivity in the country. It will be interesting to watch residential property price movements in the coming years.

Source: Times Property, The Times of India, Chennai

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