Big demand for quality office space in city

The recent India Real Estate (Residential and office) report for January-June 2016 released by Knight Frank says the lack of quality office space in Chennai caused the first half of 2016 to witness a drop in transaction activity. The period recorded 1.8 million square feet of transactions, 9 per cent lower than 2 million square feet transacted in first half of 2015 and the lowest in last two years. 

Sanjay Chugh, founder of Skylines Property Consultants points outs Chennai had been facing a shortage of Grade A quality office spaces across the city’s central, secondary and peripheral business districts. The supply of Grade A office spaces is expected to ease in 2018 with many projects in various stages of construction to be available for occupying. This has impacted the absorption levels in FY1 of 2016 as compared to 2015 by approximately 10 per cent. 

“Property development in Chennai is mostly focussed on the residential segment. This resulted in shortage of office space. Although the occupier demand is high, the challenge is to match the demand with adequate supply. 

Many developers are now embarking to design and execute commercial projects to address this demand. We will see a lot of activity in this asset class in the near future,” he said. Ajit Chordia, Managing Director, Olympia Group says the steep fall in Chennai’s IT space absorption could be attributed to poor supply of quality IT spaces in large format (more than million sq ft) in the preferred micro markets of Chennai. 

The civic infrastructure in Bengaluru, more particularly, the traffic congestion, has reached an inflection point and growth here may not be sustainable. “Bengaluru also suffers from problems of power cuts and civic infrastructure like water and sewage, which cannot be compared to Chennai. But, the rub-off has led to substantial gains being made by Hyderabad, which is probably the only developed IT office market to see steep growth in the last six months,” he said. He notes Chennai has all the advantages to gain from the shortcomings of Bengaluru. 

Chordia explains, “For this, Tamil Nadu requires a revamped IT policy and it needs to be perceived as a pro-IT industry state. Cost of acquisition of land must be made more affordable (by reducing guideline value and making available government land to private developers). New micro-markets need to be opened up as the availability in Guindy and early part of OMR had saturated.” 

“It is perhaps time for creating another Tidel Park in a new location for which the Outer Ring Road (ORR) near Poonamallee and Ambattur would be ideal. A new IT corridor or similar initiatives, coupled with making Government land available in its vicinity at affordable price will make the office space attractive for IT companies,” he added.