After a four-year hiatus business space back in demand
Chennai: Agnate to a study conducted by international realty consultant Jones Lang LaSalle, after a break of four years, investment in commercial real estate segment is once again showing signs of deft improvement.
According to the managing director of Jones Lang LaSalle, with the general public and investors still worrying about the dismal performance of shares and bonds, huge reserves of money is available for investment in commercial properties. They repose faith in the real estate segment as investment in properties helps hedge against future inflation. Investment in commercial or office real estate in the city of Chennai, for example, administers returns ranging from ten per cent to eleven per cent per annum, provided it is invested within the right place.
Chennai’s office vacancy is presently around 25 per cent, yet the preferred locations like Mount-Poonamallee Road, Guindy and pre-toll OMR have very thin vacancy levels. Last year, rents rose from five to ten percent within these preferred locations. Some of these locales have been witnessing an increased supply of office buildings. A healthy pre-leasing by multi-national companies was observed by the soon to be operational blocks of Ramanujan IT city (possessing 2 million square feet) along with SP Infocity (with 1 million square feet).
Furthermore, the first half of 2013’s fiscal attested an abeyance in absorption of commercial real estate. The city of Chennai on an average records a gross absorption of roughly 4 million square feet of office space each year.
Provided the below-average absorption of close to one million square feet during the first half of the year, approximately 3.6 million square feet of gross absorption is expected in 2013. However, with the pipeline keeping a few big transactions in it, the second half of 2013 is expected to compensate for the slowdown of the first half.
Chennai’s wide base of economic activity permits office developers to provide space to various other industries like the automotive and semi-conductors industries apart from the IT and ITeS sector. Few of the conspicuous non-IT players to have recently acquired offices on either lease or rent within the city include Flextronics, FL Smidth, Michelin, Nissan, Renault and Saint Gobain.
Moreover, it should be duly considered that the leasing activity wasn’t as high as the investment coming into the sector within India. On the contrary, both the capital as well as rental values are catapulting through the roof in China. Presently, China is about fifty per cent more than the pre-meltdown level of 2008. With the initiative of maintaining real estate prices under check, various cities of China have made it necessary and compulsory for property buyers seeking to buy property to have a local permit, exhibiting proof of payment of tax within the last five years.
