Lease rates in Chennai all set to head north

Lease rates of office space in Chennai are expected to head north with software and BPO companies lapping up built-to-suit space provided by real estate builders even before the projects are completed.

Ramesh Nair, associate director, Jones Lang Lasalle, says that lease price of office space has gone up by 5 to 10 per cent during 2005 and is expected to rise further next year as well.

The average lease price across the city is about Rs 30 to Rs 40 per sq ft for a month. Locations in central business district and areas in Information Technology Corridor, Guindy, and Ambattur are the areas with higher lease rate.

HCL has signed a nine-year lease contract in November with Arihant Foundations & Housing Ltd to occupy its software park of 2.5 lakh sq ft at Perungudi. HCL will be moving in March when the project is fully complete. It is expected that HCL will house 2,000 employees.

International real estate consultant, Cushman & Wakefield India's joint managing director, Sanjay Verma, says Chennai market was constrained by lack of supply last year. Increased supply in 2005 has further encouraged growth in demand. Commercial lease space absorbed was almost double at 3.5 million sq ft during 2005 compared to last year.

However the current state of the market still has demand outweighing supply which is likely to continue till second and third quarter of 2006," adds Verma.

Cognizant Technology Solutions has signed the leased facility of Cee Dee Yes software park on the Perungudi bypass Road. The complex with a built-up space of 1.5 lakh sq ft has recently been completed and Cognizant is in the process of occupying the building.

R Rajagopalan, vice-president-finance and administration, Cognizant Technology Solutions says that Cognizant would occupy the entire building and accommodate approximately 1,500 professionals.

Bangalore-based RMZ Corp's project called 'RMZ Millenia', with a built-up space of 5.6 lakh in the 100 feet on Taramani road, is expected to be completed in 2006-07. Officials from RMZ Corp confirmed that the companies were in talks with the commercial real estate builder to occupy the space.

Ascendas International Tech Park of five lakh sq ft, which was completed during September, is 98 per cent occupied. Companies like iNautix, Catepillar, Amadeus, Bally Systems and Visual Graphics are among others that have taken space.

Software companies prefer leased facilities, rather than owning a facility, as it can cut down the cost. Only when these software companies grow in size and reach a critical mass do they go for own campuses.

"Our current strategy is to fully-own about 70 per cent of the facilities, and to have the remaining as leased facilities. This strategy fits well into our financial model," adds Rajagopalan of Cognizant.