Industrial & warehousing demand remains healthy with about 13 mn sq ft of leasing in H1 2024

·       Chennai and Delhi NCR dominated leasing with more than 3 mn sq ft of demand each in H1 2024

·       3PL segment drove H1 2024 demand with 36% share, followed by engineering and FMCG segments

·       About 7.5 mn sq ft of new supply was recorded in Q2 2024, highest in last 2 years

With about 13 million sq ft of leasing activity in H1 2024 and 17% YoY growth, industrial & warehousing demand across the top five cities remained healthy. Chennai and Delhi NCR led the demand, cumulatively accounting for about half of the overall leasing in H1 2024. Third Party Logistics (3PL) players continued to be the top occupier of warehousing space, contributing to about 36% share in overall demand during the first half of the year. Interestingly, demand in Chennai almost doubled in H1 2024, compared to the same period last year and was largely driven by warehousing requirements of 3PL players. At a micro market level, warehousing space uptake was more than 1.5 million sq ft each in Bhiwandi (Mumbai), Chakan-Talegaon (Pune) and Oragadam (Chennai).

Trends in Grade A Gross absorption (mn sq ft)

Note: Data pertains to Grade A buildings. Absorption does not include lease renewals, pre-commitments and deals where only a Letter of Intent has been signed.

“On a quarterly basis, Q2 2024 saw about 6 million sq ft of industrial & warehousing demand across the top five cities, a 48% rise YoY. With 1.8 million sq ft of leasing and 30% share, quarterly demand was significantly driven by Delhi NCR. The demand in the region was led by large uptake of industrial and warehousing space in Farukhnagar and Sonipat micro markets. Taking cognizance of healthy demand across major cities and supportive government policies, developers have been infusing high quality warehousing facilities replete with technologically advanced features. With significant completions in first half of the year, 2024 is likely to witness Grade A supply infusion to the tune of 20-25 million sq ft.,” says Vijay Ganesh, Managing Director, Industrial & Logistics Services, Colliers India.

3PL demand remains steady in H1 2024, leasing by other segments on the rise

While 3PL players continued to dominate the demand with about 36% share, space uptake by players from engineering, FMCG and electronics segments was significant with 12-16% share each. Interestingly, both engineering and electronics segments witnessed over 1.7X times leasing activity in H1 2024, compared to the corresponding six-month period of 2023. Going ahead, driven by conducive industry-specific policies and an enabling regulatory framework, diverse segments are likely to propel the industrial and warehousing space demand in India.

“With strong macroeconomic indicators, India’s industrial and warehousing market continues to grow, and the momentum is likely to continue in the second half of the year. Upward trend in indicators such as Manufacturing PMI and IIP reflects healthy industrial activity which is likely to spur demand for industrial and warehousing spaces. Interestingly, the manufacturing PMI has been in expansionary zone since July 2021 and remained close to 60 in the last few months. Furthermore, recent budgetary announcements will improve logistics efficiencies, catalyze demand and attract investments in the industrial and warehousing sector. Additionally, increasing platform level investments will lead to influx of superior quality industrial and warehousing space in the next few years.” says Vimal Nadar, Senior Director & Head of Research, Colliers India.

With supply infusion exceeding the demand for Grade A warehousing spaces, overall India vacancy levels increased by 210 basis points (bps) on an annual basis and stood at 12.2% at the end of H1 2024. Developer anticipation of heightened demand in upcoming quarters, have resulted in fresh supply of 14.4 million sq ft in H1 2024, a 35% YoY rise. With about 5.7 million sq ft of new industrial and warehousing developments, Delhi NCR accounted for about 40% share in overall completions in first half of the year. Notably, Q2 2024 witnessed about 7.5 million sq ft of completions in top five cities of the country, a 53% YoY rise. Q2 2024 also marked the highest quarterly supply infusion in the last 2 years. Amidst healthy demand and high-quality supply infusion, rentals in key micro markets saw an appreciable uptick.

Trends in Grade A Supply (mn sq ft)

Source: Colliers

Note: Data pertains to Grade A buildings

Large sized deals account for 35% of the total leasing

During H1 2024, large deals (>200,000 sq ft) accounted for about 35% of the demand. Although a vast majority of these larger deals came from 3PL players, electronics and FMCG occupiers too had large warehousing space requirements. On a city level, Chennai followed by Delhi NCR dominated the chunk of large-sized deals.

Also Read: Industrial & Warehousing sector records 21.9% annual demand growth in H1 2024