HIGHLIGHTS • The Chennai office market performed remarkably well in 2013 with 5.2 million sq. ft. cumulative office leasing, 31% up as compared to the last year. • While tenant relocation and consolidation have continued to be an important driver of the market, corporate expansion accounted for an equal proportion of absorption in 2013. • New office supply was over 4.14 million sq. ft., which was 18% up from last year. • IT/ITeS sector remained the major office occupier with 78% share of the total absorption. • We anticipate the same level of absorption momentum in the coming quarters, although it will largely be influenced by the global economy and IT/ITeS sector performance in 2014.

1. Chennai Office Market
Snapshot 2013

2. Chennai Office
Market Snapshot 2013
Quarter-on-Quarter Absorption
Highlights
Despite the economic gloom, the Chennai office occupier market
performed remarkably well in 2013. Office space absorption in
this market amounted to over 5.2 MN SF, 31% up from 2012, with
the improvement primarily driven by a number of large leasing
transactions ranging between 50,000 to 600,000 SF in special
economic zones (SEZs). While tenant relocation and consolidation renegotiations have continued to be an important driver of
the market, corporate expansion accounted for an equal proportion of absorption in 2013.
1.8
1.69
1.67
1.6
AVERAGE
ABSORPTION
1.4
IN MN SF
1.2
0.99
1.0
0.89
0.8
0.6
0.4
0.2
0.0
1Q
2Q
3Q
4Q
Demand
Industry Wise Absorption
Approximately 17% of the total absorption of more than 31 MN
SF across top 6 cities in India was contributed by Chennai.
IT/ITeS sector remained the major office occupier with 78%
share of the total absorption, followed by other sectors such as
BFSI, Engineering and Manufacturing. SEZs such as Ramanujam
IT Park and DLF IT SEZ, together accounted for more than 2 MN
SF of office space.
Others 9%
Manufacturing
4%
Engineering
4%
2
BFSI
5%
Among the micro markets, Old Mahabalipuram Road (OMR)
and Guindy remained the preferred office destinations due to
availability of premium office space with state-of-the-art amenities at affordable rentals.
1
IT/ITeS
78%
Top 10 Transactions of the Year
Client
Building Name
Developer /
Landlord
Amazon
SP Infocity
Shapoorji & Pallonji
HP
Ramanujam IT SEZ
Fidelity
Location
Transaction Quarter
645,000
Perungudi
3Q
TRIL
600,000
OMR
1Q
Ramanujam IT SEZ
TRIL
270,000
Taramani
3Q
Mindtree
Ramanujam IT SEZ
TRIL
200,000
OMR
1Q
Capgemini
Prestige Cyber Tower
Prestige Group
200,000
Karapakkam
4Q
L & T Infotech
DLF SEZ
DLF Ltd.
189,000
Manapakkam
3Q
GAVS
SKCL
Chaitanya Builders
140,000
OMR
4Q
TCS
Ramanujam IT SEZ
TRIL
100,000
OMR
1Q
Slash Support
Shriram Gateway
Shriram Group
100,000
GST Road
2Q
Flextronics
1
Area (In SF)
RMZ Millenia
RMZ Corp.
80,000
OMR
1Q
Chennai Office Market Snapshot 2013 | Colliers International

3. Supply & Vacancy
New supply increased significantly in 2013 with the delivery of
over 4.14 MN SF of new Grade A space which is approximately
18% more than the last year’s new space addition of 3.5 MN SF.
New Supply, Absorption & Vacancy
10
30%
FORECAST
Rental & Capital Values
8
24%
6
18%
4
12%
2
Overall vacancy rates were recorded at 22% at city level,
marginally up from last year’s figure of 21.5% with a significant
number of project completions in 2013. More than 13 MN SF of
Grade A office supply was available for fit-out this year. Most of
this supply was concentrated along OMR followed by Ambattur
and Guindy.
6%
0
During the year, rentals remained stable, as compared to the
previous year, in almost all the micro markets despite significant
increase in absorption primarily due to the high vacancy levels.
2010
2011
2012
New Supply (In MN SF)
2013
2014 F
Absorption (In MN SF)
2015 F
0
Vacancy (In %)
Capital values this year increased by 8% year-on-year (YoY
across all the micro markets, barring Ambattur where capital
values declined by 6% YoY.
Average Rental Trends & Forecast
2014 Prognosis
We anticipate the same level of absorption momentum in the
coming quarters, although it will largely be influenced by the
global economy and IT/ITeS sector performance in 2014. With
large supply in the near future, rental values are expected to
remain stable. Demand will remain upbeat in SEZs with most of
the new supply expected to be leased as soon as it enters in the
market.
60
FORECAST
50
40
30
20
Preferred micro markets such as OMR and Guindy will continue
to attract occupiers due to availability of good options in these
locations. However, there will be downward pressure in
locations on fringes of the city, beyond Perungudi due to lower
tenant preference as a result of various issues such as lower
availability of talent pool, infrastructure and distance from the
city centre. Overall, the vacancy levels in Chennai are expected
to remain high due to which the rents will remain favourable to
tenants during 2014.
2
Chennai Office Market Snapshot 2013 | Colliers International
10
0
2008
2009
2010
2011
2012
2013
2014 F
Average Rental Trends (INR Per SF Per Month)
2015 F

4. Primary Authors:
62 countries on
6 continents
United States: 140
Canada: 42
Latin America: 20
195
EMEA: 85
$2
Surabhi Arora
Associate Director | Research
+91 124 456 7500
surabhi.arora@colliers.com
Amit Oberoi
National Director I Valuation & Advisory Services
& Research
Sachin Sharma
Assistant Manager I Research
For Office Services:
George McKay
South Asia Director I Office & Integrated Services
george.mckay@colliers.com
billion in
annual revenue
Vikas Kalia
National Director I Office Services
vikas.kalia@colliers.com
1.12
Kaushik Reddy
Director I Office Services
kaushik.reddy@colliers.com
13,500
Technopolis Building, 1st Floor,
DLF Golf Course Road,
Sector 54, Gurgaon - 122 002
TEL +91 124 456 7500
billion square feet
under management
professionals
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