In Chennai, buyers are not willing to settle for second-best in terms of location and quality of built-up space. Residents and visitors to Chennai cannot help but wonder at the number of ‘to let’ boards on commercial buildings. A ‘to let’ board is often the last resort of an owner, says a broker. An owner of a few thousand square feet of retail space sits in his basement shop in a shopping complex on G. N. Chetty Road, just off the prime shopping location T Nagar.
He wants to let the place out. There are many enquiries from people wanting to set up an eatery here but this place does not have water supply or drainage connection. Other retailers are not keen on this location, says the owner. There is more to ‘to let’ boards than just “slowdown”, say real estate professionals. There is demand for quality office and retail space.
Enquiries are picking up and transactions are happening in non-IT office space and retail space, but quality and location hold the key. For retail space it is not as if there is no demand, but retailers are now a lot more choosy when it comes to setting up shop, says Mr Abdur Ravoof, President, Chennai Real Estate Agents Association (CREAA). The euphoria of a few years back, when shopkeepers confidently settled for any place outside or close to prime shopping areas, has gone. No longer do they settle for the second-best location.
That explains the number of ‘to let’ boards across the city, he says. Retailers are no longer willing to take the risk - to them the top three conditions are “location, location, location.” Prime shopping areas in the city continue to be T Nagar, Anna Nagar, Purasawakkam and parts of Adyar, where demand outstrips supply. But in areas adjacent to these localities where retail space was created when the market mood was on a high you will find large vacant areas, he points out.In the peak period prior to 2008 such retail space spilled out into the ‘non-prime areas’ - for instance in TNagar even the residential
areas and by-lanes were being taken over by shopping space. It is those locations that are vacant. Similarly, for restaurant space, there is one enquiry almost every day, says Mr Ravoof. But the key is ‘ideal location’ and that is not available.
Mr Jayant Hemdev, Business Director, Hemdev’s International Realty Services, says there is demand for prime retail locations. There is simply no free space. Except for a handful of malls there is no ’standalone,’ quality retail space in the city. For office space, enquiries are resuming and again quality is the key. Here the main issues are car park space, connectivity and maintenance charges, he says. For grade–A space in Chennai, as available on R.K. Salai for instance, the monthly lease rates are Rs 50-60 a sq.ft. The next slab fetches Rs 35-45 depending on the locality and building quality.
Hemdev’s International has handled significant volumes in the last one month for office space and the market in general has seen over one lakh sq.ft of space being taken up, he says. Transaction sizes range from 25,000 sq.ft to lots of 5,000-10,000 sq.ft. The point is that apart from IT buildings, there is not much supply of quality office space for others. So, though there is a drop of about 20 per cent in lease rates as compared to peak periods, demand continues to outstrip supply. Mr Hemdev said that on Anna Salai, the new office space developed by ETA Star is being sold at about Rs 10,000 a sq.ft and even second sales at Raheja Towers attracts about Rs 7,000 a sq.ft. The new space will hit the market about two years from now.
Demand for office space is from a wide range of sectors, including automobiles, engineering, chemicals and pharmaceuticals, says Mr Hemdev. Industrial development on the periphery of the city is happening up to over 100 km and that is spurring office space demand in the city, he says. There is nearly 25 lakh sq.ft of non-IT office space in the market, estimates Mr Ravoof. The lease rates average Rs 22-60 a sq.ft per month. The key locations are Nungambakkam, Adayar, T Nagar, Anna Nagar and parts of Anna Salai from Teynampet to Guindy. Rail connectivity is the key, he says.
