Chennai’s commercial space back in demand

Chennai: In accordance to a study conducted by industry analysts, after a hiatus of four years, investment within the segment of commercial real estate is showing signs of deft improvement once again.

The study suggests that great reserves of money as investment within commercial properties is available as people are still worried about the dismal performance of shares and bonds. They recumb faith within the real estate segment as investment within properties helps hedge against inflation in the future. Investment within commercial or office space within Chennai, for example, administers returns varying from 10 per cent to 11 per cent per annum, provided it is invested in the right place.

Office vacancy:

Chennai’s office vacancy is currently hovering close to 25 per cent, still the preferred locations such as Mount-Poonamallee Road, Guindy and pre-toll OMR have very slim levels of vacancy. Last fiscal, rents arose from 5 to 10 per cent in these preferred locations. Few of these locales have been observing an increased supply of commercial buildings. A healthy pre-leasing by multi-national companies was observed by the soon to be operational blocks of Ramanujan IT city (possessing 2 million square feet) along with SP Infocity (with 1 million square feet).

Additionally, the first half of 2013′s fiscal attested an abeyance within the absorption of commercial realty. On an average the city of Chennai records a gross absorption of approximately 4 million square feet of office space annually.

In 2013, provided the below-average absorption of around one million sq ft in the first half of the fiscal, roughly 3.6 million sq ft of gross absorption is expected. Howbeit, the slowdown of the first half is expected to be compensated for by the second half of 2013, with the pipeline possessing some huge transactions in it.

Other players to have recently acquired offices:

The wide base of the city’s economic activity grants developers of office spaces to provide space to various other industries such as the automotive and semi-conductors industries apart from the sectors of IT and ITeS. Some of the conspicuous non-IT players to have recently acquired offices on either lease or rent within the city include Flextronics, FL Smidth, Saint Gobain, Michelin, Renault and Nissan.

Furthermore, it should be duly considered that that within the leasing activity in India is comparably not as high as the investment pouring into the sector. On the flip side, within China, both the rental values as well as capital are catapulting through the roof. Currently, China is about 50 per cent more than the pre-meltdown level of 2008. With the initiative of maintaining realty cost under check, various Chinese cities have made it compulsory and necessary for property buyers looking to purchase property to possess a local permit as well as exhibit proof of tax payment within the past 5 years.