Indian Economy News

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

  • IBEF
  • November 10, 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.