REAL ESTATE SCENARIO

The year 2006 started with on upbeat First Quarter with an absorption of an estimated 0.45 million sq.ft. in the office segment alone. The buoyancy pf the previous year has proved the way for a lot of prominent real estate development in the city. A few large parcels of land have been acquired by developers; however the imbalance in supply for the coming quarter may hamper the demand in the next two quarters. The rentals and capital values have witnessed a northwards trend.

The year 2003 ended on a very positive note for the city. With over 1.5 million sq.ft having been absorbed this year, the demand for commercial space has witnessed substantial enhancement due to the continuing interest from the IT/ITeS sector. The enhanced level of corporate interest for quality space in the City, has attracted the attention of developers from other cities as well and quite a few ventures have been launched by them, thus ensuring increased supply of quality space in the market.

The CBD witnessed about 5% of the total absorption of commercial space during the last quarter. There has been a short fall in supply of adequate space in the CBD owing to the lack of availability of land parcels. However, there are a few land parcels which are proposed to be developed during the years 2006-07. This influx of space would provide a much needed breather for quality office space in the CBD. Some of the notable transactions include space take-up by First India Credit corporation; Panalpina and HSBC.
The CBD rentals have seen a northward trend in the first quarter due to short supply of quality space in this micromarket.

The Off-CBD areas remained relatively active primarily due to the availability of land parcels in these areas. Staying in line With last years demand for quality office space a large projects of these spaces has been leased. Most of the new projects Will be available for occupation only by the last quarter of 2006. Some of the notable transactions in this Micro-market include space take-up by AIG; Flextronics; CDOT and Alcatel.
  

Some of the major transactions witnessed in the CBD during 2003, include Citibank e-Serve leasing approximately 140,000 sq.ft. in Spencer Plaza, HP leasing approximately 180,000 sq.ft in KRM Plaza, HCL acquiring approximately 98,000 in Delhi & Aurora Centre, ABN Amro expanding in Raheja Towers and acquiring an additional 65,000 sq.ft., and GRO taking up approximately 16,000 sq.ft in Spencer Plaza. Among the other corporates to have acquired space in the last quarter were; Microsoft, OOCL, Kotak Bank, Sara Lee, Mascon and isoft. Planman Consulting purchased approximately 16,000 sq.ft. in Egmore.

While the rental values witnessed a marginal correction this quarter, these are expected to remain stable in the short to medium term. 

The Non-CBD area witnessed significant absorption activity and accounted for nearly 40% of all transactions in the city, this year. Many companies chose to expand or set up new operations in these locations due to factors such as lower rentals as compared to CBD, proximity to residential areas, traffic decongestion and supply of good quality space.

Notable transactions include TCS leasing the approximately 365,000 sq.ft. SSI facility in Vadapalani, Verizon acquiring 91,000 sq.ft at Viceroy in Guindy, Hexaware leasing around 65,000 sq.ft in T.Nagar, leasing by Lapiz Digital and Element K leasing of around 11,000 sq.ft & approximately 32,000 sq.ft respectively at RR Chambers in Guindy, Technip taking-up approximately 30,000 sq.ft in Batra Centre and Thinksoft leasing around 30,000 sq.ft in T.Nagar.
    

The Suburban and Peripheral areas of the City have been gaining prominence in the past few years due to various factors; completion of TIDEL Park, (currently the largest Software Technology Park in India), the Old Mahabalipuram Road being designated as the IT Corridor and enhanced levels of interest from corporates like WIPRO, Infosys, TCS, Polaris, American Mega Trends, CTS and Xansa, that have established their campuses here. Presence of the American International School has also added to the attractiveness of this location.

Notable transactions in the last quarter included Sutherland leasing approximately 130,000 sq.ft in Standard Towers, Velacherry, Scientific Atlanta, Intelenet, HCL, FCI Technologies, Revit Systems and Karur Vysys Bank, all acquiring space at TIDEL Park, and Indus Software acquired approximately 12,000 sq.ft in Prakash Packaging. This location accounted for nearly a quarter of all this transactions of 2003, and the contribution is only expected to grow during the year 2004.

In the short to medium term, on account of the sustained corporate interest, values are expected to remain stable or even enhance marginally.
 

The year 2003 has witnessed substantial transactional activity, with the IT & ITES companies being the main space absorbers and accounting for nearly 90% of the total activity witnessed. The corporate interest in the city is expected to continue in the new year also, however as always, the challenge remains the reducing supply of quality, grade A space.