Office space absorption falls by 35% in Chennai, only Indian city to record decline: Report

CHENNAI: Chennai is the only big city in the country that recorded a fall in office space absorption during the third quarter of 2024, revealed the latest report released by Savills India, a global property advisory firm headquartered in London.

As per the report, the city recorded absorption of 1.8 million sqft in Q3 2024, registering a year-on-year decline of 35 per cent. Large-size deals of 1,00,000 million sqft and above continued to dominate the leasing activity, accounting for 42 per cent share.

Leasing activity in Q3 was predominantly centred in Taramani, Perungudi and MGR Salai in OMR zone-1 region, and Mount Poonamallee Road - Manapakkam, Porur, Nandambakkam and Ramapuram - which collectively accounted for 64 per cent of the total market share.

Central Business District (CBD), Guindy and OMR zone-2 region (Thoraipakkam, Sholinganallur, Navalur, and Siruseri) micro markets also remained prominent, contributing 10 per cent, 6 per cent, and 9 per cent of the office space demand, respectively.

"The IT-BPM (Business process management) and BFSI (Banking, Financial Services, and Insurance) sectors continued to be key drivers of leasing activity in Q3, accounting for approximately 24% and 18% to the overall market share, respectively," the report said.

Pointing out that the demand for office space is increasing but supply is limited, the report added that quarter-on-quarter rentals along the Mount Poonamallee Road and Guindy micro markets have shown an uptick of only 7 per cent - 9 per cent.

Meanwhile, Bengaluru (6.2 million sqft) and Delhi-NCR (4 million sqft) have registered an increase in office space absorption by 48 per cent and 92 per cent during Q3 2024. Mumbai (3.2 million sqft) and Pune (2 million sqft) recorded an increase of 35 per cent and 42 per cent, respectively. Hyderabad witnessed 8 per cent increase with absorption of 5.8 million sqft.

The office space demand in India reached 55.1 million sqkm between January and September 2024, marking a 30% year-on-year increase across six major cities. The report projected the absorption will exceed 70 million sqft before the end of this year.

"We anticipate this momentum to continue in the last quarter of the year, potentially driving absorption levels to a new record of over 70 mn sq.ft in 2024. Demand is likely to be driven by tech, BFSI, flexible workspace and engineering and manufacturing occupiers.” said Naveen Nandwani, MD, Commercial Advisory and Transactions, Savills India.