Chennai's millennium transformation: Office space surges 75 fold, residential 27

CHENNAI: The real estate landscape in Chennai has undergone a major transformation in the past 25 years, according to JLL’s latest report, “A transformational journey: 25 years of Chennai.”

Chennai has witnessed a staggering 75-fold increase in office space alone.

The office segment growth has been largely driven by the IT sector and the rise of Global Capability Centers. Chennai’s rise as a GCC hub is reshaping Tamil Nadu's economic landscape.

The state now commands an impressive 12% of India's overall GCC market share, with a particularly strong foothold in the Banking, Financial Services, and Insurance (BFSI) sector, where it claims 15% of the national footprint.

This dominance is further underscored by the fact that 60% of the technology operations of Fortune-listed BFSI companies have chosen Tamil Nadu as their base.

Siva Krishnan, Senior Managing Director (Chennai & Coimbatore), Head - Residential Services, India, JLL, said: "Chennai's transformation over the past 25 years is nothing short of remarkable. The data clearly shows the city's evolution from a manufacturing hub to a diversified economic powerhouse. With continued infrastructure development and strategic policies in place, Chennai is well-positioned to capitalize on emerging trends in technology, sustainability, and urban living. The city's resilience and adaptability bode well for its future as a key player in India's economic landscape."

The residential sector has grown tall as well. From just 10,100 housing units in 1999, Chennai now boasts 275,000 units till H1 2024, which is a 27-fold increase.

This expansion has been accompanied by a significant rise in property values, with capital values ranging from INR 5,000 to INR 25,000 per sq. ft in 2024, up from INR 850-2,500 per sq. ft in 1999.

Post Covid, that is 2021 onwards, an increase in the percentage of end users in the plots segment has led to a surge in plotted development projects in the suburbs of the city. Implementation of Real Estate Regulatory Authority (RERA) has streamlined the market by improving various parameters such as transparency, accountability, and project delivery timelines.

There is a visible upsurge in residential projects along metro rail corridors. In 2024, major infra projects such as Kilambakkam Bus Terminus and Parandur have also been added.

The logistics and industrial sector has also seen remarkable growth, with stock increasing from 1.0 million sq. ft in 1999 to 50 million sq. ft in 2024, a 50-fold expansion. This growth has been fuelled by the city's strategic location and the government's push for manufacturing and exports.

Approximately 40% of country’s EV manufacturing takes place in Tamil Nadu. Market dynamics are stable with an average absorption of 7 million sq. ft per year. Almost 70% of the stock is Grade A, which depicts Grade A is taking the centre stage.

Similarly, retail space in Chennai has expanded from 1.17 million sq. ft to 7.1 million sq. ft in 2024, depicting a 6-fold increase in the past 25 years. This growth reflects the city's rising affluence and changing consumer preferences.

Perhaps one of the most significant developments has been Chennai's emergence as a major Data Center hub. The city is now the second-largest Data Center market in India, with a colocation capacity of 88 MW. This positions the city well for the digital economy of the future. With the presence of 6 cable landing stations, good availability of power, and talent pool, Chennai is becoming an ideal location for data centre.

The city has two data centre hubs i.e., Ambattur and Siruseri, with more than 20 km of distance between them, making it possible for cloud players to adopt a three-site strategy with the emergence of a new data centre zone.

New cable landings are expected to influence the growth of the data centre hubs in the city. Approximately USD 1.54 billion of investment is expected in Chennai in the next two years in the Data Center sector, which is 27% of overall investment in India.

As Chennai looks into the future, it is well-positioned to capitalize on emerging trends in technology, sustainability, and urban living. The city's resilience and adaptability, coupled with continued infrastructure development and strategic policies, bode well for its future as a key player in India's economic landscape.

*Office space skyrockets in Chennai witnessing a 75-fold surge from 1 million sq. ft in 1999 to 76.5 million sq. ft by H1 (January-June) 2024.

*Housing segment booms with a 27-fold leap from 10,100 units to 275,000 units in just 25 years

*Property values have soared with residential prices surging 10 times, now ranging from ₹5,000 to ₹25,000 per sq. ft.

*Approximately USD 1.54 billion of investment is expected in Chennai in the next two years (2025-2026) in Data Centre sector, which is 27% of overall investment in India.