Chennai Commercial Properties: Rental Boom

The inclusion of shopping malls, commercial complexes and vacant lands in Chennai under the category of service tax according to the Union Budget will result in a hike in the rentals of commercial properties in Chennai to an extent of 10%. Even though it would not be too significant an increase, yet developers and real estate experts in Chennai are of the opinion that in the near future the rentals will still go higher in most parts of Chennai.

However, at present the rentals for offices have not yet seen a rise. Retail show room rentals on the other hand have started showing an upward trend. Market experts predict that in the next 6 months the rentals for commercial or office properties will see a marked increase. Commercial properties located in areas like Radhakrishnan Salai, Anna Salai, Guindy, Nungambakkam High Road and Greams Road are likely to have higher rentals very soon. The Central Business District or CBD area including RK Salai and Anna Nagar will have the highest impact. The increasing rentals point towards the increasing demand and limited supply of commercial properties particularly in the CBD region. Contrary to the dynamic rental market of the CBD region, the suburban as well as peripheral areas have not witnessed any kind of change in the rental values when compared to the year gone by. Moreover, the properties in these areas have a higher vacancy ratio. Thus, even if CBD is not left with much to offer in terms of commercial rental space, other areas can be of some hope. Once the vacancy ratio falls down the construction activities for fresh supply can be step up at a faster pace.

The commercial space demand in Chennai is climbing the graph quite swiftly. This will invite an additional growth for the Chennai Real Estate Market. Realizing the upcoming demand of commercial properties, several projects have already been started or at a completion stage in CBD.  The real estate developers have been sharp enough to construct modern-looking commercial properties well equipped with all facilities in CBD in order to charge a higher rental than the existing one.

The rental boom in the commercial properties of Chennai will definitely help in providing high-quality commercial/ office space. It should be remembered that land prices are the prominent base for deciding the rental value. In the last few years the land prices have seen a drastic increase, but the rental values are not in sync with the sky-high land prices. The low rental values in comparison to the high land prices eventually accounts for low quality commercial space. Interestingly, the rental values in Chennai have always been rated as the lowest in the country contrary to the higher rentals in other metros. The corresponding increase in the rentals as per the land prices has been missing since long. Now, the 10% hike in the rental values is just the right beginning in the right direction.

The consequence of higher rentals for commercial properties in Chennai will either discourage the new retailers planning to establish themselves in Chennai or open new commercial avenues for them. The city of Chennai has enormous potential for retail sector, a well-planned and organized rental strategy will ensure a healthy growth in retail sector.