Chennai's office market is booming, with global firms leasing over half of its 87 million sq. ft office space. STEM talent and competitive rates drive its appeal, with E&M sector leaders like American semiconductor firms and European oil companies. BFSI leasing, mainly by American firms, is on the rise. Modern developments and strong public transport facilitate even office distribution, notably in OMR Zones. 2023 saw record leasing of 10 million sq. ft, with 6.4 million sq. ft new supply, 38% green-certified. Top developers like DLF and Xander Group drive large-scale developments exceeding 1 million sq. ft, bolstering Chennai's position in India's office market.
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Chennai is rapidly emerging as a major office market in India, attracting a growing number of global companies. According to a new report by CBRE South Asia Pvt. Ltd., global firms have consistently leased over half of all office space in Chennai for the past six years, and this trend is expected to continue.
Several factors are driving Chennai's rise as a preferred office destination for global companies. One key reason is the city's large talent pool, particularly in science, technology, engineering, and mathematics (STEM) fields. This abundance of skilled professionals makes Chennai an ideal location for companies to establish Global Capability Centers (GCCs). Additionally, Chennai offers competitive rental rates for quality office space, with a total office stock of nearly 87 million sq. ft in 2023.
The city's strong manufacturing base is another draw for global companies, particularly in the engineering and manufacturing (E&M) sector. American semiconductor manufacturers, European oil and gas companies (EMEA), and machinery manufacturers are leading the way in E&M leasing activity, accounting for two-thirds of the total office leasing in the past three years. The recent Tamil Nadu government policy on semiconductors and advanced electronics is expected to further boost E&M activity by providing incentives like capital subsidies and training support.
Chennai is also witnessing significant growth in the banking, financial services, and insurance (BFSI) sector. American financial services and investment firms are leading the way in BFSI leasing activity, contributing nearly three-fourths of overall office leasing in this sector over the last three years.
The development of modern, campus-style office spaces in recent years has further enhanced Chennai's appeal. This, along with a well-developed public transportation system, has facilitated a more even distribution of office activity across the city. OMR Zone 1 and Zone 2 remain the most active micro-markets, but other areas are also seeing increased interest.
The average size of newly completed office buildings has tripled since 2018, reaching 490,000 sq. ft in 2023, compared to 146,000 sq. ft in 2018. This reflects the growing demand for larger workspaces. This trend is supported by larger average deal sizes, which have increased by over 60% in the past five years, rising from 21,000 sq. ft in 2018 to 35,000 sq. ft in 2023.
2023 was a banner year for the Chennai office market. The city recorded its highest-ever leasing activity with a total absorption of 10 million sq. ft, while new office space supply reached a ten-year high of 6.4 million sq. ft. Interestingly, 38% of the overall office stock in Chennai is green-certified.
The top five developers in Chennai hold a 30% share in completed office stock. These include major players like DLF, Tata Realty and Infrastructure (TRIL), Xander Group, CapitaLand, and ETL Infra. In recent years, several developers like DLF, Brigade Group, CapitaLand, ETL Infra, Olympia Group, Mindspace REIT, and RMZ Corp have unveiled large-scale office developments exceeding one million sq. ft in key areas like OMR Zone 1, OMR Zone 2, MPH Road, and Off CBD.
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