Office spaces have been burgeoning around Mumbai, Delhi, Bengaluru, Hyderabad and their likes but the newest entrant is Chennai. The high activity levels in the BFSI and the engineering and manufacturing (E&M) sectors have fueled this growth and it is reflected through surge in leasing activity and development completions. It is the third largest city in India in terms of office space absorption in 2023 marking a 10 million sq.ft., and is posing itself as a strong alternative to the traditional markets. The CBRE report delves further on what makes the city tick.
Tech talent
The rich and diverse talent base of the city, especially in STEM is a major driver. As the capital city of Tamil Nadu, Chennai is host to seven of India’s top 100 engineering colleges, eight of India’s top 100 universities, amongst others. It has also been voted as the safest city for women, vouching for its conducive work environment. The high Gross Enrollment Ratio points to several pursuing higher education and this necessitates the need to create high skilled jobs to match the rising aspirations.
Conducive policy
Several government policies have also facilitated this growth, through opening of new GCCs and research arms of organisations. The R&D Policy 2022 and Industrial Policy 2021 offer attractive incentives which include:
• Land cost subsidies for stand-alone R&D
• Exemption from electricity taxes and stamp duties
• IP benefits
• Training and support for R&D personnel
• Enhanced quality certifications
• SGST refund on capital goods
The stability of the state policies is reflected in the share of global firms consistently leasing over 50 per cent of the total since 2018. The preferred regions have been in OMR, Mount Poonamallee high road and Pallavaram – Thoraipakkam road. The government has also recently announced a payroll subsidy which offers 30 per cent, 20 per cent and 10 per cent subsidy in the first, second and third year respectively for jobs with salaries exceeding Rs 100,000 per month in newly established GCCs. This is to attract and retain skilled professionals and thus stimulate economic growth.
The market is expected to get a boost, with about 19 million sq. ft. of new development expected to be completed in next three years. The top five developers, Embassy group, Brigade, L&T Realty, K Raheja Corp and RMZ are expected to contribute more than two-thirds of this supply. Over the next three years, with growth in quality buildings and greater occupier confidence, Chennai will have about 27 million sq.ft. -FOC n
