Office space market declines in Chennai; residential sector upbeat – Times of India

Chennai: It is a mixed fortune for the city’s real estate market during the still-to-end pandemic. While office space activity has suffered a sharp decline, the residential housing sector is experiencing a revival, matching the demand and sale on par with the pre-covid levels in the city and suburbs.
Two years after witnessing a fillip, supply of office space in Chennai has suffered a downtrend, becoming the lowest among 6 metropolitan cities in the country. Real estate experts say the imminent third wave spurred by Omicron variant of covid-19 is likely to hold the decisions of IT and ITES firms from asking their employees to return to office.
A report by Savills India on the office market across 6 cities has revealed that absorption has dropped only in Chennai and Pune. While Chennai recorded a 6% decline in the gross leasing activity year-on-year from 2020 and 2021, the city had a substantial fall of 2.7 million square foot of new supply this year, as compared to 2020. Chennai had hardly nine lakh square feet of new supply, the lowest supply in the country this year, according to the report. Vacancy rate in Chennai’s office space market continues to be 13.2% in 2021 like last year.
Arvind Nandan, managing director, research and consulting, Savills India, said the decline could be attributed to subdued confidence of occupiers during the second wave of Covid-19. “Like other major cities, work from home/anywhere had an impact on office leasing activity in Chennai. Occupiers have been continuously reassessing their real estate requirements,” he said. At the same time, around 4.5 msqft of buildings are in final stages of construction and are expected to receive occupancy certificates in the first quarter of 2022, he added.
R Murugesan, managing director of ARAM Realty associated with developing an IT SEZ on GST Road, said companies employing 100-150 workers continue to function on remote mode post-covid, while major firms are using the offices with revised rents. “Most of the big IT companies were looking at returning 75% of their employees in offices before January 2022. But, the spurt due to Omicron variant has made them postpone the decisions. Staff will continue to work from home for some more months,” he said.
Chennai and suburbs have approximately 70 million square feet of IT office space, of which about 50% is on OMR alone.
However, S Sridharan, chairman of urban development and housing, CREDAI (national), said absorptions in office space market was improving in Chennai. “Office space offering more than two million square feet coming up on OMR is having traction, which is an indicator that there is demand for the office space vertical,” he added.