Information Technology space lease rents fall at chennai
A large supply of IT space on the Old Mahabalipuram Road could prove a dampener for developers as lease rents are dropping.
Aggravating the problem is the poor condition of the road, dubbed the IT Corridor, and the lack of social infrastructure.
Over the next three years, more than 20 million sq ft of IT space will be available.
Lease rents have dropped by about 8 per cent in the last six months along the corridor, say international property consultants. The reason is the huge supply in the pipeline in the city’s periphery.
While IT space within the city commands about Rs 65-80 a sq ft a month, it is far less along the OMR. Lease rents start about Rs 40 close to the city at Perungudi and Taramani, near Tidel Park, the prime location within the IT corridor, and drops with every kilometre further along the OMR to fetch less than Rs 30 near Siruseri about 30 km south of Chennai. In one recent deal at Navalur, near Siruseri, the lease rent was finalised at Rs 27 a sq ft.
According to CB Richard Ellis South Asia Pvt Ltd, of 20 million sq ft of space that is set to hit the market in the next three years, over seven million sq ft would have been added by the year-end; 12.5-13 million next year; and three million the year after. And these are just the projects in which work is on now.
However, it is not the supply alone that is the main issue because there is a market, says Thirumal Govindaraj, Head – Chennai, CB Richard Ellis. Over 6-7 million sq ft of office space – mostly IT space – has been absorbed within the city and the demand is mounting. If that can happen within the city why can’t projects on OMR, GST Road and Mount Poonamallee get higher lease rates?
Absence of facilities
It is a combination of factors; the bad roads and the lack of social infrastructure are a major issue. The much-touted IT corridor is yet to get a decent surface. People prefer to avoid the road, he says.
Ramesh Nair, Local Director, Jones Lang LaSalle Meghraj, says more than 6 million sq ft of office space has been absorbed in Chennai in 2007 and 55 per cent of this has been in special economic zones as compared to 24 per cent in 2006. Source: sify
