A 35% year-on-year increase in the leasing sector has been reported by the industrial and logistics sector

The Industrial & Logistics (I&L) sector’s total lease increased by 35% year-over-year and reached 19.1 million square feet across eight cities between January-June 2023.

According to Coldwell Banker Richard Ellis (CBRE), leasing activity is anticipated to maintain its momentum from July through December 23, 2023, with holiday season sales anticipated to play a role. Delhi-NCR, Mumbai, and Chennai led the leasing activity during the January-June 2023 period, accounting for a 60% share in the total leasing. All cities, barring Bangalore, demonstrated an uptick in I&L leasing compared to the corresponding period last year.

A steady uptick in leasing activity is predicted for the second half of the year, paving the way for the expected 32-36 million square feet of Industrial and Logistics (I&L) space to be occupied in 2023. According to the Chairman and Chief Executive Officer (CEO) of CBRE for India, South-East Asia, the Middle East, and Africa, Mr. Anshuman Magazine "the Third-Party Logistics (3PL) sector will be primarily driving this growth trajectory as they continue to implement a multipolar supply chain strategy.”

During the period of January-June of 2023, there was a notable rise in supply, which was 17.7 million square feet, a 78% year-over-year increase. This increase was mostly brought on by the release of stored stock in a few cities. Chennai, Kolkata, and Mumbai dominated the overall supply, accounting for more than half of all project completions.

During this time, large developers who were sponsored by institutional funding made up roughly 39% of the supply. More than two-thirds of these projects were completed in Delhi-NCR, followed by Chennai and Hyderabad.

Third-party logistics (3PL) participants dominated leasing activity from January to June of 2023 with a 43% share. E-commerce, retail, and manufacturing companies took up the most space in the industry, outsourcing their supply chain operations to 3PL companies to meet their storage needs, increase flexibility, cut costs, and avoid labour-shortage issues.

The take-up of space by engineering & manufacturing firms is also expected to remain strong led by the persistent endeavours of the government to enrich the investment landscape, attracting both global and domestic manufacturers to establish operations within India, says a magazine.

E-commerce and retail companies accounted for approximately 9% share each in leasing. The leasing landscape also witnessed contributions from other sectors, including auto & ancillary (7%), FMCG (6%), and electronics and electricals (5%). Space take-up was dominated by small-sized transactions (<50,000 square feet) with a share of about 44% in January-June 2023.

Between January-June of 2023, the percentage of medium-sized deals (50,000-100,000 square feet) and large deals (more than 100,000 square feet) was roughly 24% and 32%, respectively. Large deal closures were dominated by Delhi-NCR, Mumbai, and Chennai, which together accounted for nearly 65% of such deals. From a sectoral standpoint, 3PL led large-sized deal closes and accounted for a cumulative share of roughly 70%, followed by engineering & manufacturing and retail businesses.

Rental values increased on a half-yearly basis in key micro markets across cities, except Mumbai and Kolkata. Rents in Mumbai remained stable on a half-yearly basis in January-June 2023, while Kolkata witnessed a marginal dip of 2-3% on a half-yearly basis owing to excess supply addition in the market.

According to Managing Director, Advisory and Transactions Services, CBRE India, Mr. Ram Chandnani, the supply addition is forecast to reach roughly 26-30 million square feet by year's end, a major increase from the 21 million square feet completed in 2022, driven by the completion of pent-up projects in the first half of 2023. The organizations also anticipate that larger developers supported by institutional funds will continue to play a more significant role in project completions, with their share expected to reach about 40% in 2023 compared to 33% in 2022.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.