CHENNAI’S COMMERCIAL REAL ESTATE ACTIVITY

Chennai, with its rich historical background, is playing a crucial role in shaping the Indian real estate landscape. Over the past decade, the city has experienced a strong surge in office leasing, propelling it to the coveted third place among India's1 office leasing markets. This remarkable achievement is especially noteworthy considering the city’s movement from fourth or fifth place a decade ago to holding a top-three position since 2022.

The demand for offices has been growing at a steady 4.03% CAGR, over a period of 12 years from 2011 to 2023 which is a testament to Chennai’s growth and resilience. This year the gross absorption is expected to be approximately 9.0 million sq ft, demonstrating a significant 23% YoY increase.

The city boasts a sizeable existing commercial Grade A office stock of 86.2 million sq ft, accompanied by a vacancy level of 16.3% in Q3/2023. The city has strategically managed its supply, leading to a stable and balanced commercial office space stock over the years. The new commercial office Grade A supply for 2023 is expected to be around 8.4 million sq ft. In 2024, 6-6.5 million sq ft of new supply is projected.

Despite a healthy supply scenario, Chennai consistently faces a situation where demand outpaces supply, resulting in a dynamic leasing landscape. The tight market conditions have led to increased competition for prime office space, underscoring the city’s attractiveness as a preferred business destination. Chennai’s strategic supply management has effectively reduced excess vacant inventory, contributing to a healthier real estate environment.