Chennai may have lagged behind Bangalore and Hyderabad in hopping on to the bandwagon of information technology boom a few years ago. But it is fast catching up. The city has absorbed over 2 million sq ft lease space in the first six months of 2005, outstripping the total space leased in all of last year.

The reason for the pick up is the requirement of good quality real estate space by IT companies, points out Thirumal Govindraj, head of Chennai operations with real estate consultant CB Richard Ellis. Many IT companies looking to expand outside Bangalore, including multinational companies, are taking up space in Chennai.

The commercial space in the city is provided by real estate builders specialising in IT parks and residential builders also providing commercial space for IT and BPO companies.

Subba Reddy, managing director, Ceebros Property Development, says developing big commercial ventures is considered riskier, compared with residential ventures, as it involves a large investment and long lock-in period.

"The Tamil Nadu government reduced the approval time taken for information technology and BPO buildings to less than two months a year ago, which has made residential builders to construct IT Parks," he said.

MNCs such as Verizon, EDS, IBM, 24/7 and Philips have leased space in the city. Singapore-based Ascendas, a business space solutions provider, expects to inaugurate the first phase of its International Tech Park in Chennai, occupying 525,000 sq ft, to be inaugurated in two months. Almost 80 per cent of the space has been booked by IT companies.

Cognizant Technology Solutions India, which has a campus of its own spread over 400,000 sq ft in the IT corridor in Chennai, has drawn up plans to take 150,000 sq ft of leased space in a private IT Park located on the Preungudi bypass road and expects to accommodate about 1,500 professionals.

R Rajagopalan, vice president, finance and administration, CTS, says that to meet growing numbers and expansion plans the company is adding this new leased facility. "About 60-70 per cent of the facilities are fully owned and the rest leased as that fits well into our financial model," he adds.

Govindraj says that almost 80 per cent of commercial space absorbed is contributed by leasing and only the remaining space goes for companies owning campus facility and outright purchases. Official from Cushman & Wakefield say the lease space is occupied across the city like Ambattur, Guindy, Thyagaraya Nagar and not confined only to the IT corridor.

Leading residential builders that have undertaken commercial activity are Arihant Foundations & Housing Ltd, Ceebros Property Development, Chaitanya Builders, Prince and Vishranthi Builders. About 80 per cent of the business undertaken by these builders is residential and rest commercial.