The Chennai office market has managed to beat the absorption level achieved during the post-recession recovery period of 2010 by 13% with a fair amount of transaction activity in 2013, although it fell behind the peak level of 2011 by 22%, according to a Knight Frank analysis.
The resurgence in office space demand from the IT/ITeS sector bodes well for the city's office market, it said, adding, 'While the past few years saw developers of all grades joining the fray in developing office space to attract IT/ITeS occupiers, the stringent economic conditions have dampened the enthusiasm bringing in a sense of realism into the market.'
IT/ITeS companies, although recruiting, are behaving prudently and taking up genuine numbers for employment. Along with occupiers, the developers have also become cautious and are presently adopting a conservative approach to their project completion timelines.
The year 2014 has been ear-marked as a very important period, owing to the impending formation of a new central government at the helm. Sentiments are expected to improve, but they need to sustain for some time in order to bring in the required confidence in the market.
While IT/ITeS sector will continue to drive demand, the Small and Medium Enterprises (SME) sectors with requirements of smaller office spaces will show increased activity, providing an opportunity to the developers to tap this demand. The manufacturing industry is expected to gain momentum in 2014.
Going forward, office projects in OMR post toll and GST Road will evince interest from occupiers having large floor plate requirements at lower rentals. Pre-toll OMR do not have much supply planned, barring SP Infocity in Perungudi. The IT/ITeS sector will be the driving force for office space demand.
Guindy is poised to emerge as an alternative to CBD and off-CBD locations, catering to the demand of the non-IT/ITeS sector with a smaller office size mandate.
The upcoming Metro Rail would be an added advantage to this office micromarket. Meanwhile, considerable supply is in the pipeline along the post-toll OMR which will be released into the market in phases over long intervals. Among the upcoming areas of growth, Porur holds much potential, although it depends on the developers whether they would be willing to live with the fact that residential development would fetch a better price.
While IT/ITeS sector will continue to drive demand, the Small and Medium Enterprises (SME) sectors with requirements of smaller office spaces will show increased activity, providing an opportunity to the developers to tap this demand. The manufacturing industry is expected to gain momentum in 2014.
Going forward, office projects in OMR post toll and GST Road will evince interest from occupiers having large floor plate requirements at lower rentals. Pre-toll OMR do not have much supply planned, barring SP Infocity in Perungudi. The IT/ITeS sector will be the driving force for office space demand.
Guindy is poised to emerge as an alternative to CBD and off-CBD locations, catering to the demand of the non-IT/ITeS sector with a smaller office size mandate.
The upcoming Metro Rail would be an added advantage to this office micromarket. Meanwhile, considerable supply is in the pipeline along the post-toll OMR which will be released into the market in phases over long intervals. Among the upcoming areas of growth, Porur holds much potential, although it depends on the developers whether they would be willing to live with the fact that residential development would fetch a better price.
On the other hand, the CBD will continue to remain an important market in terms of value with non-IT/ITeS sectors contributing to office space demand here. On the rental front, values are expected to remain stable in most micro-markets, although marginal appreciation is envisaged in projects
witnessing occupier interest.
witnessing occupier interest.
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