india real estate outlook - h1 2014 - chennai
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CHENNAI INDIA REAL ESTATE OUTLOOK REPORT (January – June 2014)
For queries on data, contact Hitendra Gupta, Research
For any other query, contact Bertilda Fernandes, Marketing
Launches (units)
Absorption (units)
Weighted Avg Price (` per sq.ft.)
Jan – June 2014 11,377 -32% Y-o-Y
July – Dec 2014 (E) 10, 488 31% Y-o-Y
2014 Year End (E) 21,865 -12% Y-o-Y
Jan – June 2014 10,315 -26% Y-o-Y
July – Dec 2014 (E) 11, 929 14% Y-o-Y
2014 Year End (E) 22,244 -9% Y-o-Y
Jan-June 2014 4,407 5% Y-o-Y
2014 Year End (E) 4,483 3% Y-o-Y
Residential
Market Overview
New Completions (mn. sq.ft.)
Absorption (mn. sq.ft.)
Vacancy %
Jan-June 2014 1.5 -11% Y-o-Y
July-Dec 2014 (E) 1.1 -58% Y-o-Y
2014 Year End (E) 2.6 -38% Y-o-Y
Jan-June 2014 1.8 47% Y-o-Y
July-Dec 2014 (E) 2.2 -11% Y-o-Y
2014 Year End (E) 4.0 7% Y-o-Y
June 2014 22%
2014 Year End (E) 20% Office
Weighted Average Rent (` per sq.ft. per month)
Jan-June 2014 48 6% Y-o-Y
2014 Year End (E) 50 5% Y-o-Y
Market Overview
Residential
Launches
Absorption
Demand & Supply Trend - 2014
Chennai witnessed a
downward trend in demand
since 2013
Demand for homes dropped
by over 17% in 2013, it is
expected to fall by 9% in 2014
New launches are set to
decline by 12% in 2014
4,000
5,000
6,000
7,000
8,000
9,000
10,000
No
. o
f u
nit
s
Residential Market
Unsold Inventory Level - QTS
The QTS ratio has been rising
since September 2012,
signifying a weak market
Term
Developers have taken
cognizance and have reduced
fresh launches by 32%
42,450 units remain unsold as of June 2014 and will take 7 quarters
for the market to absorb
3
4
5
6
7
8
9
No
. o
f Q
ua
rte
rs
Residential Market
H2 2014 Forecast
Half-yearly Launches and Absorption Trends
New launches are estimated to
increase by 31% during the
same period
Compared to H2 2013, sales
volume will increase by 14%
in H2 2014
Positive outlook for the IT/ITeS
sector bodes well for the Chennai
market
Sales volume is expected to recover from H2 2014 onwards
20
,33
2
16
,74
7
16
,83
2
8,0
15
11
,37
7
10
,48
8
14,4
61
14
,96
1
14
,02
0
10
,42
4
10
,31
5
11
,92
9
-
5,000
10,000
15,000
20,000
25,000
No
. o
f u
nit
s
Launches Absorption
Residential Market
Weighted Average Price Trend
Half-yearly Weighted Average Trend
The bumpy ride in demand and supply
does not seem to have any significant
impact on prices as it continues to move
upwards
The weighted average price has
increased by 5% from `4,2000/sq.ft. in
H1 2013 to ` 4,400/sq.ft. in H1 2014
Going forward, prices to increase by 3% in H2 2014 to `4,480/sq.ft. on the
back of a moderate recovery in sales volume
3,500
4,000
4,500
5,000
Residential Market
New Launch Analysis
Micro-Market Split of Units Launched
Limited opportunity for development
in Central Chennai and huge
competition in the South Chennai
region, propelled developers to opt
for West Chennai
South
West North
Central
In West Chennai share of new
launches has risen to 28% in H1
2014, over 22% in the same period
last year
North Chennai observed the
sharpest fall in new launches
1%
22%
2%
75%
H1 2013
3%
28%
0% 69%
H1 2014
Residential Market
16,832 11,377
Ticket Size Analysis
Ticket Size of Launched Units by Micro Markets
79% of the new units
launched in West Chennai
were below the ticket size of
` 5 mn
New launches are
concentrated in the
peripheral markets, where
prices range between
`4,000/sq ft and `6,500/sq ft 0%
20%
40%
60%
80%
100%
<2.5 mn 2.5-5 mn 5-75 mn 7.5-10 mn 10-20 mn >20 mn
South
West North
Central
Residential Market
Absorption Analysis
Micro Market Split of Units Absorbed
OMR, GST Road and various
other nearby locations in South
Chennai have emerged as the
most preferred areas for
development
West Chennai is the 2nd largest
market in terms of preference
due to its affordable pricing,
proximity to city centre and
presence of employment hubs
3%
29%
2% 66%
H1 2013
South
West North
Central
3%
26%
3% 68%
H1 2014
Residential Market
14,020 10,315
Micro Market Health
Age of Inventory compared to QTS
South
West North
Central
West Chennai is the healthiest
micro-market, as it has the
lowest QTS and minimum age
of unsold inventory
North Chennai’s health is the
poorest, as it continues to carry
the excess unsold inventory of
projects that were launched
more than two years ago
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
5 7 9 11 13 15
Ag
e o
f In
ven
tory
QTS
Central Chennai with lowest
inventory is the second best
market in Chennai, in terms of
QTS and age of inventory
Residential Market
Price Movement
Location Price range in H1 2014
(`/sq ft) 12-month change 6-month change
CENTRAL CHENNAI
Anna Nagar 9800-10100 4% -1%
Adyar 16500-17500 3% -1%
Kilpauk 15000-15100 0% 2%
T. Nagar 18500-18700 1% 1%
Alandur 7000-7200 1% 1%
WEST CHENNAI
Porur 5100-5300 2% -2%
Ambattur 4100-4500 2% 0%
Mogappair 6100-6700 2% 0%
Iyappanthangal 3900-4300 -2% 2%
Sriperumbudur 2700-3000 -2% -3%
Residential Market
Price Movement
Location Price range in H1 2014
(`/sq ft) 12-month change 6-month change
SOUTH CHENNAI
Perumbakkam 4100-4300 2% 2%
Chrompet 4200-4700 1% 3%
Sholinganallur 4300-4800 -1% -3%
Guduvancheri 3150-3300 1% -2%
Kelambakkam 3525-3625 2% -1%
NORTH CHENNAI
Tondiarpet 4200-4300 1% -1%
Kolathur 4300-4500 2% 2%
Madhavaram 4500-4700 2% 2%
Perambur 6000-6400 3% 3%
Ponneri 3500-3600 1% 1%
Residential Market
Key Takeaways
Due to unsold inventory, launches during 2014 would decline by12%,
compared to absorption (9%)
The weighted average price expected to increase by 3% by the end of
2014 against a 5% witnessed in H1 2014
Ponneri has been announced as one of the 100 planned smart cities
that augur well for the entire North Chennai residential market
The West Chennai micro-market, with an inventory of 6 quarters and an
inventory age of 8 quarters, fares the best in Chennai city
Residential Market
Office
Vacancy Trend
Office Space Stock and Vacancy Level
Vacancy levels have been
falling since H1 2013 on the
back of a steady rise in
absorption and a slower pace
of completion of new projects
The vacancy level observed
during H1 2014 was 22%,
down from 24% in H1 2013
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
0
10
20
30
40
50
60
70
Mn
. S
q.f
t.
Stock Occupied Stock Vacancy (RHS)
Total office stock
56.2 mn.sq.ft. Occupied
43.8 mn.sq.ft Office Market
New Completion and Absorption
Absorption numbers during
H1 2014 were better than
expected due to improved
sentiment in the IT/ITeS
and BFSI sectors
While 1.8 mn sq ft of office
space was absorbed in H1
2014, only 1.5 mn sq ft of
new projects were
completed
3.1
3.8
1.7
2.5
1.5
1.1
1.2
2.1
1.2
2.5
1.8
2.2
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Mn
. S
q.f
t.
New Completion Absorption
Office Market
H2 Forecasts
2.23 mn sq ft of office space to
be absorbed during H2 2014, a
24% increase compared to H1
2013
For the year 2014, absorption
is expected to touch 4.02 mn
sq ft - an increase of 8% from
3.74 mn sq ft in 2013
The market will see new completions of 2.56 mn sq ft for 2014, as new
projects amounting to 1.07 mn sq ft are expected to be completed in the
remaining 6 months of the year
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
0
10
20
30
40
50
60
70
Mn
. S
q.f
t.
Stock Occupied Stock Vacancy (RHS)
Office Market
Weighted Average Rents
30
35
40
45
50
55
60
`/s
q f
t /m
on
th
Rental value has increased by
6% over the last 6 months
The city’s weighted average rental value is forecasted to increase from `47/sq ft/month in
H2 2013 to `50/sq ft/month in H2 2014 – registering a growth of 5%
Relatively weak pipeline of new
supply will lead to decrease in
vacancy levels to 20% by the
end of 2014, consequently
leading into increase in rentals
Office Market
Sectoral Analysis of Demand
IT/ITeS Financial Services Manufacturing Other Services
H1 2013 62% 4% 19% 15%
H2 2013 29% 20% 28% 23%
H1 2014 47% 6% 26%
21%
Share of the IT/ITeS sector
has decline to 47% during H1
2014 from a high of 62%
during H1 2013
The share of the other services sector has increased to
21% from 15% a year ago due to strong demand from
consulting, media and healthcare companies
A few big-ticket deals by AstraZeneca, ABB,
Ford and Chrysler have led to increase in the
share of manufacturing sector from 19% in
H1 2013 to 26% in H1 2014
Office Market
Deal Size Analysis
Average Deal Size and Number of Deals
During H1 2014, Chennai
witnessed a substantial jump
in the number of deals,
though the average deal size
has reduced by 12% during
the same period
The average size of
transactions has reduced to
23,600 sq.ft. in H1 2014 from
26,800 sq.ft. in H1 2013 and
from 55,000 sq.ft. in H2 2013
0
20
40
60
80
-
10,000
20,000
30,000
40,000
50,000
60,000
H1 2012 H2 2012 H1 2013 H2 2013 H1 2014
Nu
mb
er
Sq
.ft.
Average Deal Size (Sq ft) Number of Deals (RHS)
Office Market
Business District-wise Analysis
Manufacturing, small and mid-
sized IT/ITeS companies and other
services sectors are the primary
demand drivers in the CBD
markets
Micro-market Split of Absorption
14%
12%
21%
2%
51%
H1 2013
19%
7%
30% 0%
44%
H1 2014
CBD
PBD Ambattur
SBD SBD OMR
PBD OMR & GST
Office Market
1.2 mn
sq.ft.
1.8 mn
sq.ft.
Business District-wise Analysis
SBD has emerged as the most preferred market during H1 2014, as its share in
absorption has increased to 30% from 21% in H1 2013
Proximity to the city centre and easy access to the airport and presence of
excellent infrastructure has also attracted a healthy mix of occupiers from all
sectors towards SBD
The CBD markets have regained their share in total transaction, which they had
been losing out to SBD OMR markets over the last few years
Office Market
Business District-wise Rents
Business District
Rental Value Range in H1
2014
(per sq.ft. per month)
12 month change 6 month change
CBD and off-CBD 65–70 1% 11%
PBD - OMR and GST 22–35 0% 2%
SBD 45–58 4% 4%
PBD - Ambattur 18–29 5% 2%
SBD-OMR 45–58 7% 1%
Limited number of new project completions, low supply pipeline and steady demand have
helped the rents in CBD & Off-CBD to soar by 11% over the 6 months
Proximity to the Chennai airport and the presence of a developed retail infrastructure
have continued to work in favour of SBD and SBD OMR leading into faster rental growth
Office Market
Key Takeaways
In H1 2014, the total office space stock in Chennai stood at 56.7 mn sq. ft. while the
occupied stock stood at 42.5 mn sq. ft.
Better-than-expected absorption numbers of over 1.67 mn sq. ft. were reported during
H1 2014, registering a growth of 49% over H1 2013
City’s vacancy level is projected to decrease to 24% in H2 2014 as compared to 25%
in H1 2014
The CBD will continue to remain an important market in terms of value, with non-
IT/ITeS sectors contributing to the office space demand
The Chennai Metro Rail Phase-I between Koyambedu and Alandur will benefit the
SBD business district the most
2.23 mn sq. ft. of office space expected to be absorbed in the Chennai market over the
next six months
Office Market
CHENNAI INDIA REAL ESTATE OUTLOOK REPORT (January – June 2014)
For queries on data, contact Hitendra Gupta, Research
For any other query, contact Bertilda Fernandes, Marketing
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