·       3PL players drove demand at 41% share, followed by FMCG at 12%

·       Vacancy levels declined 170 basis points YoY amidst sturdy demand & limited supply

Industrial and warehousing demand across the top 5 cities remained strong during Q1 2023, rising by 11% YoY at 7.2 mn sq ft. The quarter also saw the highest leasing compared to the previous 8 quarters. This sustained streak in leasing was backed by 3PL operators who continued to expand across large markets, forming 41% of total leasing during the quarter. This was distantly followed by the FMCG sector at 12%. Interestingly, demand from Retail and FMCG sectors saw a three-fold rise YoY, as they expanded their footprints in larger markets such as Delhi-NCR and Mumbai. This pick-up in the take up of industrial warehousing space pairs well with the growth in private consumption in the domestic economy.

Delhi-NCR led the demand during the first quarter accounting for 29% share in total leasing, followed by Mumbai at 25%. Mumbai saw 37% YoY rise in leasing, led by 3PL operators who continued their expansion spree in the city despite weaker economic & business sentiment. Tauru road and NH 48 in Delhi NCR and Bhiwandi in Mumbai remained attractive markets during the quarter.

“3PL operators are targeting larger dense markets with good-quality infrastructure for expansion to ensure quick delivery of online orders. It contributed to more than 2/3^rd of the total leasing in Mumbai, led by select large deals. Average deal size by 3PL operators in the city  was more than 2 lakh sq feet, 69% higher than pan India average. 3PL operators will continue to eye larger markets as they look to augment their distribution network.” says Vimal Nadar, Senior Director, and Head of Research, Colliers India.

Trends in Grade A Gross absorption (mn sq ft)

Note: Data pertains to Grade A buildings

While industrial and warehousing demand remained sturdy during Q1 2023, new supply across top 5 cities was limited. Supply across top 5 cities declined 8% YoY, at 5.8 mn sq ft, as developers remained watchful on the evolving demand scenario. Higher raw material prices and increased logistics costs also impacted new project completions across major markets. Over the next few quarters, developers will continue to remain cautious and are likely to bring in supply to meet market demand, keeping market fundamentals intact.

Owing to limited available supply and robust demand, vacancy levels across top 5 cities dropped by 170 basis points YoY during Q1 2023 to 8.1%. Majority of the markets except Delhi-NCR saw single digit vacancy levels, backed by steady demand from 3PL, FMCG & engineering companies. With demand being upbeat amidst limited supply, rentals across top micro-markets saw an annual rise. Chakan in Pune, and Bhiwandi in Mumbai were some of the key micro markets which saw an uptick in rentals by 14% and 6% respectively.  

Note: Data pertains to Grade A warehousing/Industrial spaces only

1: Bhiwandi: Mankoli, Vadape, Padgha, Vashere

2: NH-48: Gurugram -Binola, Pataudi Road, Jamalpur- Panchgaon Road, Bilaspur-Tauru Road, Dharuhera

3: NH-16 (Chennai Kolkata Highway): Gummidipoondi, Sricity, Redhills, Poochiathipedu, Periyapalayam, Vishnuvakkam

“Over the last 7-8 quarters, demand in Pune has largely outpaced supply, with vacancy dropping significantly to 6.3% during Q1 2023. Demand from automobile & engineering sectors remains unabated & continues to account for at least 50% on an average. Riding high on this strong demand, multiple large scale warehousing parks have been planned in the Chakan-Talegaon region. This is expected to provide occupiers quality warehousing space options in next 2-3 years, thus aiding growth. Influx of superior quality warehousing spaces coupled with robust demand from occupiers will push rentals upward & keep the overall market active.” says Animesh Tripathi, Managing Director, Pune and Mid-India Industrial and logistics services, Colliers India.

Trends in Grade A Supply (mn sq ft)

Note: Data pertains to Grade A buildings

Trends in Grade A Vacancy rate (%)

Note: Data pertains to Grade A buildings

During Q1 2023, large deals (>100,000 sq ft) accounted for about 80% of the demand. Amongst larger deals, 3PL companies accounted for the highest share, followed by FMCG & engineering companies. While Delhi NCR saw the highest leasing overall, Mumbai accounted for the highest share in large-sized deals, followed by Pune. Also, more than 80% of deals in FMCG and Electronics were large-sized deals. Prominent retailers and FMCG players are undertaking large scale expansions, led by rising consumption in metro cities.

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By Varun Singh

Commercial real estate did well even when the residential sector was facing problems. However, the coronavirus has now thrown a serious question towards its stability.

The lockdown has forced many organizations to go for WFH concept. Recently even TCS announced that up to 2025, TCS will ask a vast majority of 75% of its 4.48 lakh employees globally (including 3.5 lakh in India) to WFH.

Ashutosh Limaye, Director & Head – Consulting, ANAROCK Property Consultants, says, “The COVID-19 pandemic has been a major gamechanger, making WFH a respectable and even altruistic decision. There are at least three major benefits. First, companies can save a lot of revenue on office space occupancy. Secondly, WFH can be a major productivity enhancer as employees save the time which they would ordinarily spend on daily commutes. Thirdly and as a derivative of the second benefit, it can significantly boost employee wellbeing.

WFH is obviously not a catch-all solution – many business verticals and functions still require employees to work in an office setting. A large chunk of work needs constant monitoring and professional infrastructure which only an office setting can provide. Nevertheless, market dynamics are changing quickly now, says Limaye.

• Coworking – Coworking is likely to see subdued demand over the next few quarters, but will also see the fastest revival – the pandemic pressures will eventually ease out many businesses will look to restart in these flexible workspaces. Coworking spaces are not only the most cost effective, but also offer flexibility in terms of time period of rental agreements. Coworking spaces can be rented on a monthly, day-to-day and even hourly basis.  
• Conventional Offices – Traditional office spaces are currently a source of worry for both tenants and landlords. This is because it is difficult to visualize and plan for a post-pandemic market scenario. However, when the Government’s focus shifts back to economic growth, it will roll out business-boosting incentives that will revive the fortunes of commercial office spaces quickly.

Monthly Per-desk Rentals in India’s Major Business Centres (Coworking and Conventional Offices)

Mumbai Metropolitan Region (MMR)

• Average monthly rentals in Grade A office spaces in CBD (central business district) areas like South Mumbai and Bandra Kurla Complex are anywhere between INR 18,000–27,000/desk/month for coworking spaces, and between INR 24,500–30,000/desk/month for conventional commercial Grade A offices. All non-Grade A office spaces in CBD areas are lower by at least 15-20%.
• Average monthly rentals in Grade A office spaces in SBD (secondary business district) areas like Lower Parel, Andheri Kurla Road range anywhere between INR 12,000–18,000/desk/month for coworking spaces, and between INR 15,000–18,000/desk/month for conventional commercial Grade A offices. All non-Grade A office spaces in SBD areas are at least 25-35% cheaper.

New Delhi

• Average monthly rentals in Grade A office spaces in CBD areas like Connaught Place range between INR 13,000–19,000/desk/month for coworking spaces and between INR 20,000–25,000/desk/month for conventional commercial Grade A offices. Non-Grade A office spaces in the CBD areas are at least 15-20% cheaper.
• Average monthly rentals in Grade A office spaces in SBD areas like South-East Delhi and Delhi International airport, East Delhi and North Delhi are anywhere between INR 5,000–10,000/desk/month for coworking spaces and between INR 10,000–20,000/desk/month for conventional commercial Grade A offices. Non-Grade A office spaces in SBD areas are lower by at least 25-35%.

Bangalore

• Average monthly rentals in Grade A office spaces in CBD areas like M.G. Road, Millers Road, Vittal Mallya Road and Residency Road are anywhere between INR 7,000–15,000/desk/month for coworking spaces and between INR 10,000–18,000/desk/month for conventional commercial Grade A offices. Non-Grade A office spaces in the CBD areas are lower by at least 15-20%. 
• Average monthly rentals in Grade A office spaces in SBD areas like Koramangala, Bannerghatta, Hosur road, Electronic City etc. are anywhere between INR 3,600–8000/desk/month for coworking spaces and between INR 6,500–15,000/desk/month for conventional commercial Grade A offices. Non-Grade A office spaces in SBD areas are lower by at least 25-35%.

Pune

• Average monthly rentals in Grade A office spaces in CBD areas like Laxmi Road, Camp, Bund Garden, Koregaon Park, Shivaji Nagar etc. are anywhere between INR 4,750–9,500/desk/month for coworking spaces and between INR 10,000–12,500/desk/month for conventional commercial Grade A offices. Non-Grade A office spaces in the CBD areas are lower by at least 15-20%.
• Average monthly rentals in Grade A office spaces in SBD areas like Kalyani Nagar, Yerwada, Viman Nagar, Aundh, Baner etc. are anywhere between INR 3,600–7,200/desk/month for coworking spaces and between INR 8,000–9,000/desk/month for conventional commercial Grade A offices. Non-Grade A office spaces in SBD areas are lower by at least 25-35%.

Chennai

• Average monthly rentals in Grade A office spaces in CBD areas like Anna Salai, Nungambakkam, RK Salai are anywhere between INR 5,700–13,300/desk/month for coworking spaces and between INR 7,000–15,000/desk/month for conventional commercial Grade A offices. Non-Grade A office spaces in the CBD areas are lower by at least 15-20%. 
• Average monthly rentals in Grade A office spaces in SBD areas like T.Nagar, Alwarpet, Kilpauk, Egmore, Chetpet, Royapettah, Kotturpuram etc. are anywhere between INR 5,400–8,600/desk/month for coworking spaces and between INR 7,500–10,000/desk/month for conventional commercial Grade A offices. Non-Grade A office spaces in SBD areas are lower by at least 25-35%.

Hyderabad

• Average monthly rentals in Grade A office spaces in CBD areas like Gachibowli, Madhapur, Manikonda, Kondapur etc. are anywhere between INR 4,750–7,650/desk/month for coworking spaces and between INR 6,000–9,000/desk/month for conventional commercial Grade A offices. Non-Grade A office spaces in the CBD areas are lower by at least 15-20%.
• Average monthly rentals in Grade A office spaces in SBD areas like Pocharan, Uppal etc. are anywhere between INR 3,600–6000/desk/month for coworking spaces and between INR 3,500–7,000/desk/month for conventional commercial Grade A offices. Non-Grade A office spaces in SBD areas are lower by at least 25-35%.

Noida

• Average monthly rentals in Grade A office spaces in Noida are anywhere between INR 4,750–9,500/desk/month for coworking spaces and between INR 6,000–10,000/desk/month for conventional commercial Grade A offices. Non-Grade A office spaces are lower by at least 10-20%. 

Chandigarh

• Average monthly rentals in Grade A office spaces in the city are anywhere between INR 4,750–7,600/desk/month for coworking spaces and between INR 6,000–9,500/desk/month for conventional commercial Grade A offices. Non-Grade A office spaces are lower by at least 10-20%. 

Work From Home – Not A Catchall Alternative

For India Inc, the evolution of the WFH option is at least as exciting as that of coworking – if not more, considering its multiple benefits. That said, it will not work for every type of company. Most major industries have functions which require a high level of centralized supervision as well as data security which are only available in a formal office setting. As is becoming evident in this trial by fire, video conferencing technologies have very distinct limitations, too. 

Most employees depend on the infrastructure provided in their offices to do their work efficiently, and also require a formal office setting to get into ‘work mode’. While WFH is not a one-size-fits-all workplace alternative, social distancing norms are likely to remain in place for a while to come and more and more companies will need to consider this option. 

Also Read: Construction work resumes at non-hotspot zones, MMR not to benefit

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