Chennai Office Stock to Cross 100 MSF Mark by End-2026: CBRE-CII Tamil Nadu Report

Chennai, February 20, 2025: Real estate consulting firm CBRE South Asia Pvt. Ltd and CII Tamil Nadu on Thursday released a joint report titled, ‘Tamil Nadu: The State of Unlimited Possibilities’, at the Infrastructure Summit 2025, highlighting the state’s accelerated economic growth. As per the report, the growth momentum is fuelled by Tamil Nadu’s robust infrastructure, which underpins its overall economic development. This has culminated in Tamil Nadu’s emergence as a key investment hub, further driven by factors like the state’s strategic location, diverse economy, business-friendly environment and favourable investment policies.

The state government’s industry-specific policies are major factors that are attracting investments and generating employment significantly, strengthening the state’s real estate landscape. These policies offer subsidies and incentives, fuelling growth across key sectors such as automobiles, electronics, IT/ITeS, data centres, GCCs, life sciences, and semiconductors. The government is developing industrial and defence corridors to enhance the industrial ecosystem further, promoting balanced growth across all districts through self-sustaining, integrated industrial nodes that will drive future expansion.

Chennai Office Sector

The growing demand for modern office spaces has led to a surge in campus-style developments in recent years in Chennai, appealing to both global and domestic corporates. The office stock in Chennai is likely to cross 100 million square feet (msf) by the end of 2026. Total office stock in Chennai currently stands at over 89 msf, the fifth largest in India as of December 2024. The report also points out that private equity investments in Chennai’s office assets touched US$1.19 bn in the last two years (2022-24).

The influx of capital and the entry of prominent developers have facilitated the construction of high-quality office buildings, providing various space options for occupiers. The strong market confidence, coupled with an efficient public transportation network, has resulted in a widespread distribution of office activity across the city.

Chennai’s office market, once dominated by the technology corporates, is witnessing a shift towards the BFSI and life sciences sectors. Existing technology firms in the city have established a strong infrastructure, creating an attractive environment for other industries. BFSI firms are surging towards digital infrastructure management and business transformation through analytics and cloud technology. These firms continue to expand in Chennai, buoyed by the city’s tech workforce, adept with cutting-edge skills to navigate the fintech landscape.

The life sciences sector is witnessing rapid expansion, with 0.8 msf absorbed in 2024—a 60 per cent jump from last year. Backed by top research institutions and a skilled workforce, the state is advancing in biopharmaceuticals, diagnostics, and regenerative medicine.

Moreover, Chennai is swiftly positioning itself as a major hub for Global Capability Centres (GCCs) and is ranked third in GCC leasing after Bengaluru and Hyderabad (2022-24). US firms were the most active in setting up GCCs during this period. Tamil Nadu, currently hosting over 250 GCCs, presents a compelling proposition for businesses seeking to establish or expand their global operations. GCC leasing in Chennai stood at about 2.9 msf in 2024. With its attractive incentives, strong talent pool, robust corporate ecosystem, and abundant quality office space, the state has solidified its position as a preferred destination for GCCs. The Tamil Nadu government has proactively initiated policies across sectors to foster investment and job creation. In the Tamil Nadu Budget 2024-25, the government announced GCC-specific policies to aid the growth of such facilities in the state. Additionally, the state’s policies on fintech, R&D, startups, and semiconductors offer attractive incentives, further enhancing its appeal as a destination for established and emerging firms.

Data Centres

Chennai has emerged as one of the fastest growing and second biggest data centre markets in India after Mumbai. The total DC stock in Chennai stood at 220+ MW as of December 2024 and hosts 20 per cent of the country’s overall data centre stock. Key data centre occupier segments in Chennai are engineering and manufacturing, BFSI, tech, retail/ e-com and cloud service providers. The city has been a preferred site for DC due to the substantial cost arbitrage provided by the coastal line, which facilitates direct submarine routes, large bandwidth availability, and an increasing presence of domestic IT / ITeS firms. Consequently, Chennai has become a preferred location for secondary and disaster recovery DC sites, further enhanced by its strategic geographic proximity to major Asian cities.

Established DC locations include Ambattur and Siruseri in West and South Chennai. Recently, Oragadam in West Chennai has been witnessing growing investor interest and is expected to emerge as a key DC destination in the city.

In 2024, the city continued to be India’s most prominent DC market, accounting for approximately 20 per cent of the country’s DC stock. While Chennai already hosts several small-to-medium-scale DC facilities, the city has also recently recorded large-sized investments.

This growth is fuelled by the city’s strong academic ecosystem, industrial base, and Tamil Nadu’s pro-business policies, making it a prime destination for multinational corporations. Additionally, Chennai’s lower cost of living compared to Bengaluru and Mumbai offers businesses a cost-effective advantage without compromising talent or infrastructure.

Anshuman Magazine, Chairman & CEO, India, Southeast Asia, Middle East & Africa, CBRE, said, “Tamil Nadu’s strategic vision of becoming a USD 1 trillion economy by 2030 is driven by its robust industrial and services sectors. The continued attractiveness of the state as an investment destination in India, particularly for global/domestic manufacturing players, is expected to further push it to the forefront of innovation and technological evolution. The state’s strong manufacturing base provides a solid foundation for the growth of its services sector across cities such as Coimbatore, Madurai, and Tiruchirappalli. Also, we also expect investor interest in these cities to grow substantially in the future as they look for expansion avenues, thereby safeguarding the state’s position as a premium investment destination in the long run.”

Preetham Mehra, Senior Executive Director & Head – Government Practice, CBRE India, said, “Tamil Nadu has experienced rapid urbanisation and industrialisation in recent decades and the state has emerged as a prime investment destination due to its strategic location, diverse economic base, conducive business environment, favourable investment climate, and robust infrastructure. Blending rich cultural heritage with rapid modernisation. Tamil Nadu’s robust physical infrastructure underpins its economic development. The state’s extensive network of roads, airports, and railways enhances connectivity, fostering economic and social growth while improving the quality of life for its residents. This well-connected transport network facilitates seamless global and domestic business activities. Ongoing infrastructure initiatives are poised to catalyse real estate activity further.”

Emerging Cities of Tamil Nadu

Economic and real estate growth in Tamil Nadu has extended significantly beyond Chennai in recent years. Cities such as Coimbatore, Madurai, and Trichy are expected to emerge as leading Tier II investment destinations in the state, driven by several policy and infrastructure initiatives. Further, a strong local economy, connectivity to other key cities, growth of the IT / ITeS sector, and availability of skilled manpower are expected to create new avenues for real estate development in these cities in the coming years.

In 2024, Coimbatore experienced significant office space absorption, reaching approximately 1.0 to 1.2 msf. The supply of new office spaces in the city ranged between 1.2 to 1.5 msf, while the total stock of available office space was estimated to be between 8 to 10 msf. This indicates a strong demand for office spaces in the region, driven by business expansion and economic growth. Madurai, on the other hand, recorded office space absorption between 50 to 80,000 sq. ft. The supply of office spaces in the city ranged from 80 to 100,000 sq. ft, while the total stock stood between 0 to 3 msf. Similarly, Tiruchirappalli witnessed office space absorption in the range of 50 to 80,000 sq. ft. The supply of office spaces was slightly higher, ranging between 100 to 120, 000 sq. ft, whereas the total stock remained between 0 to 3 msf. This indicates a growing commercial real estate sector in the city, with increasing office space supply potentially catering to future business needs and investments.

Driven by policy support and infrastructure advancements, these cities are set for significant growth. Strong local economies, seamless connectivity, a thriving IT/ITeS sector, and an abundant skilled workforce are expected to unlock new opportunities for real estate development in the years ahead.

Key Investment Interest in Emerging Cities of Tamil Nadu

• A leading Indian IT firm to expand its presence in Coimbatore by acquiring three additional floors with an area of around 260,000 sq. ft. in SVB Tech Park, Kalapatti.
• A healthcare service provider is likely to set up a Technology and Global Delivery Centre at ELCOT, Madurai with an investment of INR 50 crore and generate 700 employment opportunities.
• A large global electronic company’s equipment manufacturer to invest INR 2,000 crore in Tiruchirappalli which is expected to create 5,000 employment opportunities.