Chennai has emerged as a favourite office market for global firms as the State Capital of Tamil Nadu has seen half of its overall office leasing grabbed by multinational companies.
The share of global firms in the overall office leasing has consistently remained above the 50 per cent mark in the last six years in the city and this trend is expected to persist in the upcoming years, says a report by realty consulting firm CBRE.
Global Capability Centres (GCCs) in engineering & manufacturing and banking, financial services and insurance (BFSI) sectors dominated annual office leasing activity in 2023.
Due to a vast talent pool, thriving manufacturing capabilities and availability of quality office space at competitive rentals, Chennai has gained prominence among global companies to establish its global capability centres. A high number of colleges and universities offering science, technology, engineering and mathematics (STEM) courses have been a key enabler for GCCs in the city, it added.
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Key contributor
“Tailored initiatives for industries like engineering and manufacturing, fintech, IT, aerospace and electronics have fueled a substantial upsurge in office space absorption during 2023. This surge positions Chennai as a key contributor to India’s overall office market, Anshuman Magazine, Chairman and CEO – India, South-East Asia, Middle East and Africa, CBRE.
Last calendar year, the engineering & manufacturing(E&M) and BFSI companies witnessed about ten very large-sized office deals (more than 2 lakh sq ft), a significant increase compared to one or two such deals typically closed in previous years.
In 2023, About 46 per cent of absorption in overall office space was led by American companies followed by 34 per cent of domestic firms. As per the report, the E&M (engineering & manufacturing) sector led the absorption with 28 per cent followed by BFSI with a 22 per cent share in 2023.
Chennai has emerged as the third-largest market in terms of office absorption in 2023. The southern city is emerging as a compelling choice for occupiers, alongside its more established counterpart cities such as Delhi-NCR, Mumbai, Bangalore and Hyderabad.
Chennai recorded its highest-ever leasing and decadal high supply with a total absorption of 10.0 million sq ft and supply stood at 6.4 million sq ft in 2023.
“With companies increasingly adopting innovative technologies such as Artificial Intelligence, SaaS, Big Data and IoT, Chennai is positioned at the forefront of evolving trends. The growth of BFSI and E&M GCCs in Chennai is likely to enhance further reshape the city’s office real estate momentum,” Ram Chandnani, MD , Advisory & Transaction Services, CBRE India.
Chennai represents 10 per cent of India’s overall commercial office stock. The office stock in 2023 was at 87 million sq ft in 2023. It is interesting to note, that 38 per cent of overall office stock is green-certified in the market. This shift is attributed to a confluence of factors that have bolstered the city’s appeal and competitiveness, it said.