Lower rents, rising demand: Chennai office vacancy falls below 10% as GCC demand outpaces supply

Chennai’s commercial office market is witnessing tighter occupancies as demand continues to outpace fresh supply, bringing vacancy in prime office spaces down to single digits, according to a report by real estate data analytics and research firm CRE Matrix.The report said vacancy across the city’s Grade A and A+ office stock stood at 9.9 per cent at the end of June this year, down sharply from the peak of 15.8 per cent recorded during the 2023 calendar year. It attributed the decline to sustained leasing demand, particularly from Global Capability Centres (GCCs), alongside constrained new supply. Demand for office space is currently running at 1.8 times the pace of supply, it added.Chennai now has an operational stock of 120 million sq ft of Grade A and A+ office space, while another 42 million sq ft is under various stages of construction, the report noted.Highlighting the city’s growing role in the GCC ecosystem, CRE Matrix said Chennai is home to more than 400 Global Capability Centres employing over two lakh professionals.“Chennai is now home to more than 400 Global Capability Centres and over two lakh professionals, the fastest-growing GCC hub among India’s Tier-I cities, expanding at nearly twice the national pace,” CRE Matrix CEO and Co-founder Abhishek Kiran Gupta said.Gupta also said companies setting up operations in Chennai incur occupancy costs that are roughly one-fifth lower than in Bengaluru.“Chennai retains its people better than any other Tier-I market in the country,” Gupta said.The report also positioned Chennai as the most cost-effective among India’s major office destinations. Grade A office rentals in the city average Rs 75 per sq ft a month, compared with Rs 92 in Bengaluru, Rs 106 in Gurugram, Rs 175 in Mumbai and Rs 182 in Delhi.“Occupiers benefit from 20–60 per cent lower occupancy costs without compromising on infrastructure, talent, or institutional-quality assets,” the report said.Beyond rental costs, the report highlighted the city’s workforce stability. It said Chennai records the lowest voluntary attrition among Tier-I GCC hubs, with attrition at 5.9 per cent in non-ER&D roles and 8 per cent in engineering and R&D roles.On the supply side, the report said Chennai’s office market is supported by a diversified base of developers with multi-million-square-foot portfolios. DLF accounts for the largest share of office stock, while Mindspace REIT has become the second-largest owner of completed office assets through a combination of project development and strategic acquisitions.Other developers with a significant footprint in Chennai’s office market include Tata Realty, The Xander Group, RMZ Corp, Ascendas/CapitaLand, Shapoorji Pallonji Group, Embassy REIT, Brigade Enterprises and Knowledge Realty Trust, the report added.