CHENNAI: A looming slowdown in the IT sector and the economic uncertainty have sent absorption levels of commercial real estate space in the city into a tailspin.
Chennai saw lease transactions for nearly 1.8 million square feet in the January-June period as against the 2 million square feet it had absorbed in the same period last year. This is a fall of around 12%, while nationally, the decline was 21%.
Office space absorption across key metro cities in the country in the first half of 2012 fell to 13.4 million square feet against 16.9 million square feet in the same period a year ago, a report from real estate consultancy firm Cushman & Wakefield said.
Bangalore witnessed the highest absorption of office space in the first six months, of 3.01 million square feet. The city registered a 46% decline in absorption over the same period last year. The National Capital Region saw the highest decline in office space absorption of 53%, but Mumbai and Hyderabad bucked the trend, registering 19% and 5% increase, respectively.
"Businesses are on a wait-and-watch mode. They are waiting for some positive triggers to conclude transactions," S Ramaswamy, senior consultant at real estate consultancy RECS Group said.
Prominent developer of commercial and residential space, Arihant Foundation's CMD Kamal Lunawath said enquiries for space was strong, but there exists some difficulty in conversions.
The slowdown in offtake had its impact on rentals in suburban areas. "Peripheral areas like Sholinganallur, Ambattur and beyond GST witnessed a slight drop in rentals," N Hariharan, office director, Cushman & Wakefield, said. "But, there are a lot of enquiries for transactions. We hope the second half will be good and we may end the year with absorpotion levels same as 2011."
Rentals in the Central Business District (CBD), (areas in 5 km radius around Gemini Flyover) have shot up 10%. "There is very strong demand for office space in CBD and off CBD areas. In some areas like Greams Road, there is a 10% increase in rentals," Hariharan said.
Fidelity inks deal for 1L sq ft office space
Rajesh Chandramouli
CHENNAI: American financial services powerhouse Fidelity Investments has expanded its footpirnt in Chennai. The company has signed a lease deal for one lakh square feet of office space at Arihant Viceroy on Sardar Patel Road, adjoining Raj Bhavan.
"We have signed a deal with FIS Global (part of the Fidelity Group) for one lakh square feet," Kamal Lunawath, CMD of Arihant Foundations, said. He refused to divulge details of the transaction.
The transaction was put through in the past few days at around Rs 65 per square foot per month. "Market conditions are tepid. There aren't too many transactions. The location for which the deal was signed is ideal for office as it has great connectivity to airport and IT hub, and it's also in the vicinity to the upcoming metro line," an industry source said.
Ajit Chordia, MD, Khivraj Estates, said, "In the present market situation, Rs 65 per sq ft is a good price. The tenant has paid a premium of at least Rs 10 per sq ft for the building, perhaps taking into consideration its upkeep." The property was leased out to Verizon till recently.
Fidelity is present in Chennai through FMR India at DLF Infocity in Pamapuram. The centre provides a range of operations, including IT development & support, BPO and analytics, to Fidelity's US customers.
Source:timesofindia.indiatimes.com
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