Chennai Office Property Market Overview April 2015

1 Research & Forecast Report | April 2015 | Colliers International

IT/ITeS remains the prime driver with 53% of total absorptionChennai 1Q 2015 absorption stood at 0.8 million sq ft as compared to the previous quarters 1.33 million sq ft. The IT/ITES sector accounted for 53% of the total absorption followed by manufacturing at 17% and pharma at 16%. The BFSI, engineering, FMCG, media & entertainment and logistics sectors were also represented in the deals closed during the period. Approximately 50% of total absorption was in the CBD followed by OMR (16%) and Ambattur (11%). Notable transactions include the Income Tax Department taking the entire BSNL Building of 0.19 million sq ft located in the CBD. Apart from this, Ford took 0.06 million sq ft in SP Infocity at OMR and Bank Bazaar took 0.05 million sq ft in India Bulls located at Ambattur.

Cautious market sentiments restricted the new supply to only 0.40 million sq ft. Projects contributing this supply were Lalah Tower (0.28 million sq ft) by Ramaniyam on Nelson Manickam Road; Sri Balaji Complex (0.06 million sq ft) by Shanthi Builders at Royapettah; and AGR Platina (0.05 million sq ft) by an independent developer at Ekkaduthangal. The total available supply for lease / fit-out stood at 10.7 million sq ft. By micro-market, OMR (IT corridor) accounted for 34% of this total available supply, followed by Ambattur 28% and the CBD 27%. No new projects / parts of projects were launched in Chennai during the quarter. Lack of new completed supply has led to a decline in vacancy rates especially on the OMR stretch.

Weak absorption continued to keep pressure on rents and capital values in 1Q 2015, resulting in a marginal decline by 1% in OMR I (Madhya Kailash - Perungudi - Toll Gate I). All

City Office Barometer

Research & Forecast Report

Chennai | OfficeApril 2015

Rental Values

*Indicative Grade A rents in INR per SF per month**OMR I (Madhya Kailash Perungudi- Toll gate I) ***OMR II (Thoraipakkam Sholinganallur) & OMR III (Semmencherry Siruseri)

MICRO MARKETS RENTALVALUE*% CHANGE

QoQ YoY

CBD 60 - 80 0% 0%

Guindy 50 - 60 0% 4%

Ambattur 20 - 30 0% 0%

OMR I** 45 - 60 -1% 1%

OMR II & III*** 25 - 45 0% 0%

GST Road 35 - 40 0% 0%

INDICATORS 1Q 2015 2Q 2015 F

Vacancy

Absorption

Construction

Rental Value

Capital Value

2 Research & Forecast Report | April 2015 | Colliers International

other micro-markets remained stable; this is also attributed to the huge vacant stock, especially on the OMR stretch.

During this quarter, the Chennai Government has allocated INR500 and INR750 crore for the Chennai Mega City Development Mission and the Integrated Urban Development Mission, respectively for 2015 - 2016. Apart from this, the sum of INR420 crore has been allocated for the Tamil Nadu Urban Road Infrastructure Fund. Civic bodies are targeting the overall infrastructure development of the city through these funds.

Colliers View

Th e demand for offi ce space is expected to gain further momentum in line with the revival in economic growth projected for the medium term. However, the high vacancy level, coupled with upcoming supply is likely to restrain the rent growth particularly in micro-markets like Th oraipakkam, Sholinganallur and Semmenchery to Siruseri over the next few quarters.

Top 5 Transactions of the Quarter

Key Under Construction Projects

CLIENT BUILDING NAME AREA (SF) LOCATION LEASE / SALE

Income Tax Department BSNL Buidling 197,000 CBD Lease

Ford SP Infocity 69,000 Old Mahabalipuram Road Lease

Bank Bazaar India Bulls 50,000 Ambattur Lease

Citi Bank TRIL 44,000 Old Mahabalipuram Road Lease

Vasan Eye care Hospital Harini Towers 40,000 CBD Lease

BUILDING NAME DEVELOPER AREA (SF) LOCATION POSSESSION

SP InfoCity, OMR Phase 2 Shapoorji Pallonji Group 1,200,000 Old Mahabalipuram Road 2015

Chennai One (BPO Park) Phase 2 ETL Developers 1,100,000 Old Mahabalipuram Road 2015

Estancia Block B2 L&T & Arun Excello 469,000 GST Road 2015

Notes:

1. Offi ce Market: Prime offi ce properties in Chennai are located in four principal sub-markets: the CBD, SBD (Guindy, Manpakkam,Velachery) and the PBD (Old Mahaballipuram

Road (OMR).

2. Rents/Capital Value: Market average of indicative asking price for Grade A offi ce space.

3. Available Supply: Total Grade A offi ce space being marketed for sale or lease in surveyed quarter.

4. City Barometer: Represents increase, decrease or stable scenario; as compared to previous quarter.

5. All the fi gures in the report is based on market information as on 25th March 2015.

Quarter Wise Absorption

Average Rental And Capital Value Trend

105

9,000

10,500

7,500

6,000

4,500

3,000

1,500

0

90

75

60

45

15

30

0

0.4

0.8

1.2

1.6

2.0

2.4

0

1Q 2

013

2Q 2

013

3Q 2

013

4Q 2

013

1Q 2

014

2Q 2

014

3Q 2

014

4Q 2

014

1Q 2

015

Mill

ion

Sq.

ftRe

ntal

Val

ues

INR

Per

Sq

Ft P

er M

onth

Capi

tal V

alue

s IN

R P

er S

q.ft

1Q 2

008

1Q 2

009

1Q 2

010

1Q 2

011

1Q 2

012

1Q 2

013

1Q 2

014

1Q 2

015

1Q 2

016F

1Q 2

017F

Forecast

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