The industrial and logistics sector reported 11.4 million square feet absorption in Q3 of 2023

During Q3 of 2023, the industrial and logistics sector saw an absorption of 11.4 million square feet, indicating a considerable increase in both supply and absorption.

Of the absorption, tier I cities accounted for 78%, and tier II and tier III cities for the remaining 22%. According to the most recent Savills India report, the absorption is being driven by a spike in demand from the manufacturing and retail sectors as well as continued sustained demand from the third-party logistics (3PL) industry.

According to the report, in Q3 of 2023, the sector had a new supply of 17.8 million square feet, of which 14.1 million square feet (79%) came from tier I cities and 3.7 million square feet (21%) from tier II and III cities.

Major developers responded to increased demand by delivering projects throughout the cities, which resulted in a rise in supply.

In Q3 of 2023, the total amount of grade A space accounted for 52% of absorption and 54% of supply. The data suggests that there is a notable rise in the demand and supply for graded and complying buildings in tier I cities, with grade A space accounting for 54% of absorption and 62% of supply in these areas.

In the upcoming years, there will be a nationwide shift from C and D-grade spaces to grade A due to the growing focus placed on EHS (Environmental, Health, and Safety) standards and the resulting increased demand for quality-compliant space from occupiers.

The manufacturing industry has experienced growth as a result of more activity and different incentive programmes. Consequently, the manufacturing sector's share of overall absorption has been steadily rising.

With 33% of the total absorption in Q3 of 2023, the manufacturing sector was the main driver of overall demand. With a predicted contribution of more than 30% to the overall absorption over the next two years, this trend is probably going to continue.

The manufacturing industry was closely followed by the 3PL sector, which contributed 32% to the overall absorption in Q3 of 2023. Retail accounts for 16% of the demand, while FMCD/FMCG accounts for 5%. The remaining ones, which include urban warehousing, FTWZs, chemical storage, cold storage, and ICDs, contributed about 11%.

Delhi-NCR continued to lead in Q3 of 2023, accounting for 31% of the total supply; Mumbai came in second with 12%. Tier II and Tier III cities combined accounted for 21% of the overall supply, with Chennai and Bengaluru contributing 8% and 7%, respectively, to the total supply. Delhi-NCR and Pune led the way in absorption in Q3 2023 with respective contributions of 14% and 11%, followed by Mumbai at 12% and Bengaluru and Chennai at 11%.

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