Chennai’s office market is set to remain resilient through FY2026, with occupancy levels holding firm at around 90.5–91% and rental rates projected to rise by 3–4%, according to ICRA.

Strong leasing activity in FY2025 and early FY2026, led by IT-BPM and engineering & manufacturing firms, has helped absorb a steady flow of new Grade-A supply. The Pallavaram micromarket is emerging as a supply hub, while established corridors like OMR and South-west Chennai continue to drive demand with low vacancy levels.

A significant portion of the upcoming supply is concentrated in the Pallavaram micromarket. Of the total ~5 msf of new supply anticipated in FY2026, roughly 2.5 msf (50%) is located in this area. Pallavaram is gaining traction due to its proximity to the Chennai International Airport and a growing presence of IT/ITES firms. Approximately 21% of the new supply expected in FY2026 is already pre-leased.

Chennai’s Grade-A office market accounts for about 8.5% (~89 msf) of the total stock across India’s top six cities as of June 30, 2025. Within Chennai, the OMR and South-west regions collectively hold 80% of the city’s Grade-A office stock. The top contributors to the city’s office supply are the micro markets of Tharamani, Perungudi, and Mt. Poonamallee Road, which represents 35% of the total. Vacancy levels in these three micro markets are expected to remain low in FY2026 due to limited upcoming supply and strong absorption momentum.

Rental rates in Chennai’s top five micromarkets—Perungudi, Tharamani, Thoraipakkam, Mt. Poonamallee Road, and Guindy—have seen a compound annual growth rate (CAGR) of about 3-4% over the past five years. The citywide average rental rate is also projected to increase by 3-4% in FY2026. The top 10 developers in Chennai hold 47% of the Grade-A office supply, with eight of them maintaining occupancy rates above 90%. Regional players are also showing strong occupancy.

ICRA noted that the Chennai office market recorded a CAGR of approximately 5% between FY2017 and FY2025, which is lower than the ~7% observed across India’s top six cities. As of June 30, 2025, Chennai’s share of the total office supply in the top six cities was 8.5%, down from 10% on March 31, 2017. This share is projected to remain steady in FY2026.