Indian Economy News

Demand for industrial and warehouse leasing rises in the third quarter and stays steady at 17 million square feet

  • IBEF
  • October 23, 2023

A survey by the international commercial real estate service Colliers India states that in the first three quarters of 2023, the demand for industrial and warehouse space in India's top five cities totaled 17 million square feet of gross lease. At 17.5 million square feet, these levels are similar to the same time last year. Leasing activity is projected to increase as we approach the last quarter of the year, having stabilised at 17 million square feet after a weak start to the year.

According to the research, leasing activity surged dramatically in the third quarter of CY23, posting a 55% quarter-over-quarter (q-o-q) growth, despite growth being slower during the first half of 2023. During this nine-month period (January-September), Pune had the highest demand (24%), closely followed by Mumbai (23%). Delhi NCR, which is often the top contender among India's big cities, was overtaken by both cities.

In Mumbai, Bhiwandi remained the most active micro-market, while Chakan-Talegaon continued to be the preferred market for industrial occupiers in Pune.

Chennai stood out in the third quarter of CY23, leading leasing activity for the first time with a 30% share among the top five cities. Various sectors such as third-party logistics players (3PLs), engineering, and electronics witnessed increased demand, driven by manufacturing players, including Fast Moving Consumer Good (FMCG) companies, electronics, auto, auto ancillary, Electronic Vehicle (EV), and semiconductor companies.

Mr. Vijay Ganesh, managing Director, Industrial & Logistics Services at Colliers India, stated that during the first three quarters of 2023, FMCG businesses alone took up 1.5 million square feet of industrial and storage space, more than double the amount from the same time the previous year.

He further mentioned that the trend is set to continue owing to support from the government for the manufacturing sector led by initiatives like Production linked Incentive (PLI) and Make in India.

Large leases (more than 100,000 square feet) made up 72% of all leasing activity in 2023. These large-scale transactions were dominated by 3PL companies, then FMCG and automakers. The two main cities where big deals happened were Mumbai and Chennai.

Additionally, during the first half of the year, the percentage of vacant positions dropped by around 100 Basis Points (BPS), to 9.4%.

About 40% of the total demand for warehousing was met by third-party logistics companies (3PLs), who were the biggest users of warehouse space. The 3PL industry's active leasing in Chennai and Mumbai droves this demand.

Driven by 3PL, engineering, and FMCG players, the leasing trend is anticipated to continue in the year's last quarter, with a close in the vicinity of 22-25 million square feet. The medium-term demand forecast for 3PL businesses is still favorable, and it is expected that the industry will rule warehousing operations in the upcoming quarters.

According to Mr. Vimal Nadar, Senior Director & Head of Research, Colliers India, in order to define the future of the industry, developers are also anticipated to place a greater emphasis on tech-driven investments, such as fleet management systems, inventory monitoring, and warehouse management systems.

He further stated that institutional players are becoming more prevalent, and important government initiatives like Multimodal Logistics Parks, the Gati Shakti programme, the National Logistics Policy, and the DESH Bill will be crucial in institutionalising the industry and opening a plethora of opportunities for developers and investors.

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