Real Estate Outlook 2024
With continuous infrastructure upgrades and the commitment of the government to reinforce Chennai’s positioning as an economic and investment hub, the real estate market of the city has grown from strength to strength in recent years. The city not only beat market expectations in 2023 but holds promise of an equally strong performance in 2024. The office market of Chennai breached all earlier highs and recorded more than 2x leasing activity in 2023 as compared to the annual average of the last four years. At the same time, other real estate asset classes like industrial and warehousing, housing and data centres also saw strong traction during the year. Moreover, Tamil Nadu state has seen about $2,000-3,000 million of overall FDI inflows in each of the last two fiscal years. The momentum of inflows is likely to continue in the next few years and trickle down to the real estate sector, accelerating the growth of various asset classes.
The demand momentum is expected to continue into 2024 as well. Furthermore, the city has a pipeline of 4-5 mn sq ft of new Grade A office developments at different stages of construction. The majority of the upcoming supply is likely to be seen in MPR and PTR micro markets of the city. Pursuant to the recent floor-wise denotification of SEZs, Chennai is likely to see additional supply of office space. As of 2023 end, Chennai had about 26.5 mn sq ft of SEZ office space, at a vacancy level of about 19%. We expect incremental leasing from these spaces as well during the next few quarters.
“The real estate market of Chennai has exceeded expectations during 2023 and is poised for sustained growth in the next few years. The office market has recorded an impressive 10.5 mn sq ft of gross absorption during 2023, driven by OMR Zone 1 and MPR micro markets in the city. Global capability centres (GCCs) also viewed Chennai as an attractive location for space take-up led by cost-effective rentals and presence of quality Grade A stock. The demand momentum, particularly during the second half of the year 2023, will pave way for an optimistic start to 2024. Amidst healthy demand, office rentals are likely to firm up by about 3-5% in the next few quarters.” says Arpit Mehrotra, MD, office services, Colliers India.
“The city is seeing fast paced growth with infrastructural upgrades such as the upcoming metro and flyovers that will fuel commercial & residential real estate across key locations of the city. Areas around CBD, OMR Zone 1 stretch of Madhya Kailash–Perungudi and MPR stand to benefit the most. The proposed increase in FSI along the Chennai metro and MRTS corridors holds immense potential for unlocking real estate value for developers & investors along the corridors in the city. Interestingly, Chennai will continue to build upon its data center capabilities and attract significant DC investments in the next 3-4 years” .
