Chennai recorded strong leasing of 1.97 million sq ft, led by IT-BPM and manufacturing. Suburban South dominated activity. Vacancy declined with no new supply added. Rents appreciated in key submarkets. With a healthy demand outlook and limited new stock, rents may rise further as space tightens in core locations.
Chennai’s office market kicked off 2025 on a strong note with gross leasing volume (GLV) touching 1.97 million sq ft, marking a 19% quarterly increase. Suburban South remained the top-performing submarket, with IT-BPM firms continuing to drive demand, while city-wide vacancy saw a marginal dip despite no new supply.
Demand Led by IT-BPM and GCCs
Leasing momentum was healthy in Q1, led by the IT-BPM sector, which contributed to 47% of total GLV. Suburban South accounted for the largest share of leasing, followed by Peripheral South-West and Peripheral South.
- Top demand drivers: Technology firms, GCCs (Global Capability Centres), and select manufacturing occupiers.
- Submarkets in focus: Suburban South saw 36% of total leasing, with CBD also recording a notable uptick in net absorption (41,100 sq ft).
- Occupier preferences: Consolidation and cost-effective office footprints remained key themes.
Notably, the share of larger deals (above 100,000 sq ft) increased, reflecting occupier confidence in long-term workspace needs.
Zero New Supply Keeps Vacancy in Check
No new projects were completed in Q1 2025, which helped maintain steady city-level vacancy rates despite elevated demand. The overall vacancy rate stood at 15.91%, a slight decrease from the previous quarter.
- Highest vacancy: Peripheral South at 31.53%
- Lowest vacancy: CBD at 4.91%
- Inventory held steady: Total stock stood at 49.3 million sq ft, with no completions during the quarter.
As absorption outpaced supply, landlords in well-performing submarkets began holding firm on pricing, particularly in Grade A assets.
Rentals Continue Upward Trajectory
The weighted average quoted rent in Chennai’s Grade A office market reached ₹80.1/sq ft/month, up from the previous quarter. This trend was most prominent in the Peripheral South and South-West, where sustained demand pushed rents up by 1.4–5%.
- CBD rents: ₹122.33/sq ft/month
- Peripheral South-West: ₹70.48/sq ft/month
- Suburban South: ₹75.21/sq ft/month
Rental growth is being driven by strong occupier demand, limited new supply, and a healthy pipeline of A+ grade developments quoting above-market rents.
Notable Transactions
Select large-scale deals helped boost leasing activity this quarter:
- Walmart Global Tech: Leased 46,000 sq ft in Olympia Platina
- Valeo: Took up 45,000 sq ft in DLF Cybercity.
- Flsmidth: Signed for 41,000 sq ft in Ramanujan Intellion Park
These deals highlight continued preference for established business parks in core and suburban locations.
Outlook
With 1.9 million sq ft currently under construction, most of which is expected to be completed over the next 12–18 months, Chennai’s office market is poised for a steady supply infusion. However, given sustained occupier interest and cautious development activity, vacancy levels are likely to remain range-bound while rentals edge up in key micro-markets.
