DTZ CHENNAI OMB Q2 09

Forenquiriesonthisreport,pleasecontact:PriyankarBhikshu,AssociateDirectorConsulting&ResearchTel:[phone]E-mail:[e-mail]ervicesenquiries,pleasecontact:HughHamilton,DirectorOccupationalandDevelopmentMarketsTel:[phone]E-mail:[e-mail]relieduponasabasisforenteringintotransactionswithoutseekingspecific,qualified,professionaladvice.Whilstfactshavebeenrigorouslychecked,DTZcantakenoresponsibilityforanydamageorlosssufferedasaresultofanyinadvertentinaccuracywithinthisreport.Informationcontainedhereinshouldnot,inwholeorpart,bepublished,reproducedorreferredtowithoutpriorapproval.AnysuchreproductionshouldbecreditedtoDTZResearch.(c)DTZResearchchennaiupdateofficemarketbriefQ22009Grade‘A’officemarketstatisticsNote:BaseRentsreflectaveragewarmshellrents.Occupancycostisrentplusalloutgoingswhereoutgoingsincludefixedmaintenancechargesapplicableasperlocalmarketnorms.*ReflectoccupancycostchangescomparedtoQ408(notaccountingforexchangeratefluctuations).Exchangerate:US$1=INR47.8Arrestofdownturn-InitialsignsobservedThesecondquarterof2009witnessedverylessinfusionofnewsupplyintheChennaimarket.Thenewsupplywas86%lesserthanthesupplythatmaturedinQ109Therewereonlytwonotableprojectcompletions,bothinthePBDregionsofPerungudiandKarapakkam.Thesupplymaturinginthisquarterwastothetuneof0.47millionsqft(msft),contributedbyRMZMilleniaCampus(0.325msft)andCeebrosITPark(0.15msft)inthePBD.Comparedtopreceding3quarters,absorptioninQ209pickedupsignificantly.Grossabsorptionforthisquarterwasapproximately1.1msft,whichismorethandoubletheabsorptioninQ109.Thetakeupinthisquarterisprimarilycontributedbysmallticketdealsoflessthan30,000sqftofspace.IT/ITEScompanies,theprimarydemanddriversforlargerspacedealsarereluctanttocommittonewspaces,giventheirfinancialcrunchandthehopeforfurtherfallinrentalsinthecomingmonths.Overallvacancylevelshavereducedby4%q-o-q,whichisprimarilyduetothereductioninthesuburbanmarket.Thereasonsforthisphenomenonaretwofold-higherabsorptionwitnessedinQ209andlackoffreshsupplyintheSuburbanmicromarket.However,thereareasignificantnumberofbuildingsstilllyingvacantacrossthecity,averagingto32%ofthetotalexistinggradeAstockofofficespace.GradeAofficerentals(2005–Q22009)Source:DTZResearchRentalshavewitnessedfurthercorrectioninQ209,albeitinlesserdegreethanthecorrectionwitnessedinQ109.Whileinabsoluteterms,therentalshavedroppedmarginallyacrossthecity,comparatively,PBDregionshavewitnessedthemaximumfall(10%q-o-q),followedbytheCBDandoffCBDregions(7%q-o-q).Persistenthighvacancylevelshaveledtoincreasedwillingnessofdeveloperstoslashrentals,withhopesofstimulatingactivity.Whilethescheduledcompletionsforthenextquarteraresubstantial,thesearepredictedtobedelayedfurther.Thisisduetothecontinuanceofpoormarketresponse,financialcrunchandtheexcesssupplysituation(especiallyinthePBD).Anemergingtrendobservedisthewillingnessofdeveloperstointroducetheirfreshsupplyofofficespaceonlyuponinkingaleasedeedforthesame.Asmarketsentimentscontinuetoplunge,developersarewillingtonegotiatedealsatlowerrentals.Thereisalsoadeliberatesuppressionofsupplybydelayingprojecttimelinesinorderallowdemandtocatchup.Developerscontinuetolureprospectivetenantsbyofferinginnovativeleasestructures.Giventhedownwardpressureonthemarket,rentalsareexpectedtoreducefurtherandexistingvacancylevelstoprevailfortheshorttermfuture.Supplyandtakeup(Q22008–Q22009)Source:DTZResearchRecenttransactionsSutherlandleased100,000sqftatVelachery,SBDACSleased40,000sqftatRMZMillennia,PBDAmazonleased80,000sqftatSPInfocity,PBDTotalstock(sqm)Vacancy(%)Baserent(INR/sqft/mo)Occupancycost(US$/sqft/yr)%change(fromJan09)*6monthforecastCBD/OffCBD254,948356518-6.6-Suburban1,098,58994312-9.2▼PBD2,207,89543258-8.8▼Overall3,561,43132339-8.14▼India•