Covid has affected majority of the countries and this impact will have a cascading effect on all the markets be it automobile, IT, textiles, exports, real estate, hospitality and tourism amongst others.
Our views on Chennai Office Market due to Covid is as below:
Chennai being a conservative city, the prices of real estate has grown over a period of time. We saw a good trend in the commercial absorption of real estate between the 2nd quarter of 2019 up till covid. There was a good demand for Grade A buildings especially in the areas of Guindy, CBD and the IT Corridor that is the Old Mahabalipuram Road (OMR). The rentals in the markets had increased from Rs. 65 to Rs. 80 per sq.ft. per month for Grade A buildings in the Guindy Area . Rentals in CBD were fluctuating between Rs. 60 to Rs. 100 per sq.ft. per month depending upon the location, specifications of the building and the proximity to metros etc.
Our assumption of the trend in these areas is that the rentals would not fall very drastically considering the lack of GRADE A buildings in these locations. There would surely be a marginal correction in the rentals which may fluctuate between 5 % - 10%. There is a possibility that tenants would approach the landlords post the lockdown to reduce the rentals and the landlords may or may not reduce the rentals depending on the quality of their building and the quality of the tenants and this would also be only for a few months and may not be a long term scenario especially in areas such as Guindy and CBD.
Rental fluctuations on OMR is a sure shot , considering a fairly decent supply of space that is available in the IT sector with two more areas which are developing very well that is the 100 Feet Radial Road and the Porur area close to Chennai Trade Centre. Large number of buildings on the IT Corridor had been absorbed between 2018 and till beginning of 2020. However due to covid, there will be a correction in the rentals in this area as we may notice a number of companies downsizing due to the impact of covid in USA and EUROPE which have been outsourcing most of their IT work to INDIA.
There will be a good demand for Co - working companies as this would give an opportunity to allow these companies the flexibility option of expanding or downsizing their operations over time. However, this would totally depend upon how the co-working companies evolve over time keeping in mind SOCIAL DISTANCING as the way forward. The conventional format of 35 to 45 sq.ft. per person on carpet area in a co- working scenario will need to change. Also, one of the key factors of co-working is Community working and this too will need to be altered as we may not know who is the person we would be meeting at the cafeteria area for a cup of coffee etc. This would be of prime importance which would need the co-working players to go back to their think tank to find the best possible solution for social distancing.
Another important factor would be the proximity of the work place close to home, which means smaller sizes of office spaces or co-working companies closer to residential locations will become the future. More people would want to commute to offices which are close to home as they would not be comfortable to use the common services such as metro or bus and would like to travel by their own vehicles . As a result of which, traffic would increase and would also create an issue for parking and hence we need to identify options for future growth close to residential zones and with good parking facilities.
Presently this is my analysis on the current situation during covid. However, one would be able to get a better idea of the real estate market only after two to three months post lockdown to actually identify and understand the impact of the downsizing of the corporates as well as the pulse of the landlord.
To look for positives in the current scenario and move on with the same gusto that we always have , will not only make us more focused, but march on towards a better world again.
STAY SAFE STAY HOME
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