Chennai’s office space vacancy is recording a steep fall, dropping to 11 percent last year from 32 percent in 2010, a leading property consultancy firm has said. International property consultant JLL has also asserted that Chennai is expected to drive office demand this year due to investments in the infrastructure sector.
‘The net absorption in 2018 is forecast to be lower than this year due to scarce supply and this is likely to be acute in Chennai and Pune. Thanks to more investment in infrastructure, cities such as Pune, Hyderabad and Chennai are expected to drive office demand in 2017,’ a statement from JLL said.
Mumbai accounted for 18 per cent of office space absorption the second highest in the country in the first quarter of 2017, said a report.
Bengaluru is leading
While this was on a par with Bengaluru, the National Capital Region (NCR) ranked first, accounting for 19 percent of all transactions. According to the report, January to March this year was one of the strongest quarters observed in the recent years for the office market, with close to 8 million square feet of space taken up across key cities.
Vacancy in Bengaluru declined from 14.5 percent in 2010 to 3.8 percent in 2016, while in Chennai it came down from 32 percent in 2010 to 11 percent. Hyderabad has also seen its vacancy reduce from 15.5 percent in 2009 to nine per cent in 2016. Similarly, in Pune, the vacancy has reduced from 17 percent in 2009 to 5.5 percent.
The net absorption in 2018 is forecast to be lower than this (2017) year due to scarce supply and this is likely to be acute in Chennai and Pune. As a result, rents will grow in even in Grade-B buildings too and certain micro-markets. The pace of growth in rents will not be the same across cities and micro-markets as they may have run their course already.
According to JLL India, CEO and country head, Ramesh Nair, the pan-India office vacancy in 2016, at 15 per cent, was the lowest in eight years. On the back of positive office space demand from sectors like manufacturing, logistics, FMCG, consulting firms, etc, the year saw a record low vacancy largely driven by IT cities such as Bengaluru, Pune and Hyderabad each of which saw the vacancy in single digits. The sharpest reduction in pan-India office vacancy was seen between 2013 and 2016 when it went from 18.5 per cent to 15 per cent.