CHENNAI: Post-election euphoria notwithstanding, commercial realty in the metro is likely to carry its extended slump of the last three years into 2015. According to realtors, Chennai especially is set to play laggard to others when it comes to office and retail space this year.
Several industry reports, including those by Cushman and Wakefield and Jones Lang Laselle, released following the end of the last quarter are indicating that while a slight increase in demand may be likely in 2015, the lack of supply and space in both the office and retail segments are unlikely to see much improvement.
“The normal new leases that Chennai city sees is somewhere around 40 lakh square feet a year. The last year was a miserable one as far as this figure was concerned,” Vishwajith Kumar, Director of Navin’s Housing and Properties told Express. “It was only due to a few big deals that came about at the end of the year that absorption grew to 35 lakh square feet. If not for those, the figure would have been much worse,” he pointed out.
Casa Grande’s Managing Director M Arun Kumar also agrees. “The overall economic climate has not seen much improvement and Chennai in particular is lagging far behind the little revival that other similar sized markets like Pune, Bangalore and Ahmedabad have witnessed post the change in government,” he said.
According to developers, the main factor fuelling the lack of expectations is that even with demand for smaller offices witnessing an increase, larger office spaces that came up on projects started before the slump are likely to remain vacant this year. Especially, the ones outside the Chennai Corporation limits.
“Demand is only centered around city limits. The office spaces around the OMR and Ambattur are not taking off and are unlikely to do so,” said Kumar. The last couple of years witnessed very few new projects taking off and almost no new supply being expected to come in this year, a real recovery is not quite on the cards yet. The uncertain business climate in the state is also not helping revive the segment, and in fact negates the small gains that came in the wake of the elections.
“Hardly any new company, leave alone large ones, has come to the city last year. We are losing those to cities like Bangalore and Pune,” pointed out Kumar.
Retail space too is not doing well, with Cushman and Wakefield noting that only 0.5 million square feet of new supply in mall space is likely to be added to the Chennai market this year. And no new projects are likely.
But the lack of new supply could be a blessing in disguise. With none on the horizon an uptake in demand could see prices rising and existing space getting filled up. C Chitty Babu, Chairman and CEO of Akshaya Properties is positive on those aspects. “Enquiries have been rising in the last few months. I think with demand up, existing space will fill up,” he said.
■ Demand is centred around city limits, with office spaces in Ambattur, OMR not taking off much
■ City is losing out large companies to cities like Bengaluru, Pune
■ Uncertain business climate in State negates small gains
■ Only 0.5 mn sqft of retail space expected to be added this year