Chennai Office Absorption Hits Record 3.1 Million Sq.Ft in Q1 FY26

The Chennai office market for FY2026 has witnessed unprecedented rental activity with Grade-A net absorption of 3.1 million sq.ft recorded from April to June, more than twice the new supply of 1.3 million sq.ft that entered the market in this quarter.

An analysis of industry trends indicates that this hike in demand has translated into an overall occupancy rate of 90.6% as of June 2025, a very attractive rise from 87.8% recorded a year ago. Analysts provide inputs stating that Chennai’s IT services, global capability centers (GCCs), and manufacturing hubs are the three primary growth engines for the city’s office market.

“The momentum in Chennai is not just a short-lived spike, but reflects structural demand from sectors consolidating and expanding in the city,” says a real estate consultant tracking the market.

With demand thus seeming to solidify, it now rests on the real estate landlords’ shoulders to secure the price advantage; as per analysts, new supply barely keeping pace with absorption will see vacancy levels tighten further and occupancy rates keeping intact between 90.5-91% throughout March 2026. At a time when several metros are mired in an oversupply scenario, this scenario favors Chennai as one of the most resilient office markets in the country.

Market watchers also note that large corporates are increasingly choosing Chennai for its relatively lower rentals compared to Bengaluru and Hyderabad, coupled with strong infrastructure and talent availability. The presence of manufacturing majors and the continued rise of GCCs have diversified demand, insulating the market from heavy IT dependence.

Developers are responding cautiously with new projects, mindful of keeping supply in check. Only 1.3 million sq ft was added in Q1 FY26, and the pipeline for the year is expected to remain moderate.

With occupancy stabilising above 90% and absorption consistently exceeding fresh supply, Chennai’s office real estate outlook remains bullish. Analysts believe that if the current pace sustains, the city could set new records in annual office absorption by the end of FY26.