Tech sector absorbs nearly half of office space in Chennai: Study

CHENNAI: Office space absorption in the city stood at 1.7 million square feet during the October-December 2022 period, a study by real estate consulting firm CBRE South Asia Pvt Ltd said on Sunday.

In Chennai, key sectors that drove absorption included technology (43%), engineering & manufacturing (17%) and flexible space operators (12%). Also, space take-up witnessed across IT segments with a share of 79%.

Key transactions recorded during Q4 2022 in the Chennai were WorkEZ leased 135,000 sqft in The Address, WNS Global Services leased 80,000 sqft in Prestige Cyber Towers and Tekion leased 50,200 sqft in Embassy Splendid Techzone.

As per the report findings, the office sector in India witnessed gross absorption of 56.6 million sqft during 2022, registering a growth of 40% (Y-o-Y), marking the second-highest leasing activity ever after it touched the peak in 2019 with 65 million sq ft. Supply marginally increased from 49.7 million sqft in 2021 to touch 50.6 million sqft in 2022. As per the report, Bangalore, Delhi-NCR, Hyderabad and Mumbai accounted for nearly 75% of the yearly leasing activity.

On an annual basis, technology corporates drove leasing with a share of 29%, followed by flexible space operators (14%), engineering & manufacturing companies (13%), BFSI firms (13%), and research, consulting & analytics organizations (7%).

Small- (less than 10,000 sq. ft.) to medium-sized (10,000 – 50,000 sq. ft.) transactions dominated leasing in 2022 with a share of 85%, similar to the trends observed in 2021.

The share of large-sized deals (above 100,000 sq. ft.) in 2022 remained at 7%. Bangalore followed by Delhi-NCR and Pune dominated large-sized deal closures in 2022, while a few such deals were also reported in Hyderabad, Mumbai, Chennai, and Ahmedabad.

Leasing during the Oct-Dec quarter was driven by tech corporates with a share of 32%, followed by flexible space operators (11%), engineering & manufacturing companies (10%), BFSI firms (9%), and research, consulting & analytics organizations (8%). During the quarter, an increase of 1-6% in quoted rentals was witnessed in ORR and

PBD Whitefield in Bangalore and Off CBD, MPH, Ambattur and PT Road in Chennai. Anshuman Magazine, chairman-CEO - India, SouthEast Asia, Middle East & Africa, CBRE, said, “With a sustained recovery in leasing, moderating vacancy levels and persistent demand for investment-grade assets, the rental recovery continued across cities throughout 2022.

On the outlook for 2023, he said the famous Old Mahabalipuram Road Zone 1 and 2 popularly called as the information technology corridor, Mount Poonamallee High Road (near DLF IT Park) are likely to garner interest in 2023. Technology firms would continue to drive this space, he said.

On the residential front, he said south and west Chennai markets would dominate both sales and new launches. “Mid-end and high-end categories are likely to be the key drivers of housing sales and launches,” he said.