Office Segment Leads Investment Inflows

The office segment remained the dominant asset class, accounting for one-third of the total inflows with investments totaling USD 0.4 billion. Hyderabad emerged as the prime location for office investments, attracting over half of the segment’s capital during Q1 2025.

Strong Growth in Residential and Industrial Segments

Residential investments soared nearly threefold compared to Q1 2024, reaching USD 0.3 billion and contributing 23% to the total inflows. Foreign investments accounted for over half of the residential capital, driven by significant large-scale deals and joint ventures between global investors and local developers.

The industrial and warehousing segment also maintained momentum, recording USD 0.3 billion in investments—representing a 73% YoY increase. The positive performance of macroeconomic indicators, including a high Manufacturing PMI of 58.1 in March 2025, boosted investor confidence in the segment.

Rise of Alternate Assets

Investment inflows into alternate assets, such as data centers and senior housing, remained strong at USD 0.07 billion. Data centers, in particular, gained traction, supported by capital deployment in a proposed hyperscale data center in Mumbai.

City-wise Investment Breakdown

Mumbai led the city-wise investment share with USD 0.3 billion, accounting for 22% of total inflows—a remarkable 841% YoY growth. Bengaluru and Hyderabad followed, with 20% and 18% shares respectively. Multi-city deals also constituted a significant 31% of overall investments.

Expert Insights

Badal Yagnik, CEO of Colliers India, noted, “Institutional investors continue to exhibit confidence in Indian real estate as investments rose by 31% YoY to USD 1.3 billion in Q1 2025. The sustained momentum, supported by strong economic growth and favorable policies, is expected to continue throughout the year.”

Vimal Nadar, Senior Director and Head of Research at Colliers India, added, “The residential segment has seen a significant surge in demand, driven by rising luxury housing trends and strategic joint ventures between global investors and local developers. The potential reduction in repo rates could further stimulate mid and affordable housing investments.”

Outlook for 2025

Experts anticipate that the positive investment momentum will persist, bolstered by optimistic economic projections, robust demand, and proactive government measures. The anticipated easing of monetary policy may further catalyze investments, especially in residential and industrial segments.

Also Read: APAC Investor Optimism to Drive Institutional Investments in Indian Real Estate in 2025

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The industrial & warehousing segment emerged as the top-performing asset class, accounting for USD 2.5 billion in investments, a 190% surge from the previous year. The sector contributed 39% of the total realty inflows, surpassing the office segment’s USD 2.3 billion (36% share). Foreign investments dominated, contributing over 80% to the industrial inflows, highlighting India’s growing prominence as a global manufacturing hub.

The office segment also witnessed significant activity in the second half of the year, with investments rebounding to USD 2.3 billion. Meanwhile, residential investments grew by 46% YoY, reaching USD 1.1 billion, driven by sustained interest from domestic players.

Key Highlights of 2024 Realty Investments:

• Total Investments: USD 6.5 billion, the highest since 2020, up 22% YoY.
• Industrial & Warehousing: USD 2.5 billion, marking a 190% increase.
• Office Assets: USD 2.3 billion, driven by foreign investments (77%).
• Residential Sector: USD 1.1 billion, up 46% YoY.
• Domestic Investments: Accounted for 33% of inflows, increasing by 27% YoY.

Mumbai attracted the highest share of investments at 24%, with USD 1.6 billion inflows primarily focused on office and industrial assets. Multi-city deals accounted for 39% of total investments, while Bengaluru, Chennai, and Delhi NCR maintained steady inflow shares of 8-9% each.

Key Drivers:

1. Industrial Growth: India’s manufacturing boom and enhanced logistics efficiency fueled industrial & warehousing investments.
2. Domestic Momentum: Domestic investments surged, reflecting growing confidence among Indian institutional investors.
3. Foreign Capital: Foreign investments comprised 66% of the total inflows, with APAC investors contributing significantly.

Expert Insights:
“Indian real estate continues to attract robust investments, underscoring the sector’s resilience and growth potential. Industrial and warehousing assets have taken center stage, reflecting strong demand and India’s emergence as a manufacturing hub,” said Badal Yagnik, CEO, Colliers India.

Looking ahead, the real estate market is expected to sustain its momentum in 2025, with Tier-I cities remaining the primary focus. Rising demand for Grade A developments and evolving infrastructure initiatives are likely to drive further growth across asset classes.

City-Wise Investment Trends (2024):

• Mumbai: USD 1.6 billion (24% share).
• Multi-City Deals: 39% share of total investments.
• Bengaluru & Chennai: 9% and 8% shares, respectively.

Indian real estate continues to shine as a lucrative investment destination, with 2024 marking a pivotal year in its growth trajectory.

Also Read: Industrial & Logistics Real Estate

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·       Mumbai and Chennai drove demand with 27% share each

·       3PL players contributed over 40% of quarterly demand

·       Retail and E-commerce segment saw about 2X leasing activity

Amidst steady leasing, new supply inched towards 7 million sq ft during Q1 2024, the highest in last two years. Around 33% of the new Grade A developments in the first quarter was concentrated in Delhi NCR. Industrial and warehousing leasing activity across the top five cities remained buoyant during Q1 2024 at 7 million sq ft. Mumbai and Chennai led the demand with about 55% share. Interestingly, leasing in Chennai, especially remained robust, with industrial & warehousing space take-up in Q1 2024 almost twice the leasing activity in corresponding period of last year. Across the top five cities, Bhiwandi in Mumbai with 1.7 million sq ft of Grade A demand, was the most active market for Q1 2024. Bhiwandi was followed by Oragadam in Chennai, which surpassed leasing activity of Chakan Talegoan in Pune for the first time in a while.

Third-party logistics players (3PL) continued to be the top occupiers of industrial and warehousing space, contributing to over 40% in the total warehousing demand. 3PL space uptake was driven by healthy activity in Chennai particularly. The city accounted for about 43% of the overall 3PL activity in the top five cities. Interestingly, at the Pan-India level, retail players accounted for 16% of the demand during the quarter, followed by engineering and automobile players with 12% share each.

Trends in Grade A Gross absorption (million sq ft)

Source: Colliers

Note- Data pertains to Grade A buildings

Trends in Grade A Supply (million sq ft)

Source: Colliers

Note- Data pertains to Grade A buildings

“While 3PL players continued to drive industrial & warehousing leasing activity, demand from Retail, Engineering and Automobile players too accounted for a significant share in Q1 2024. It is noteworthy to see that the cumulative share of these three sectors have risen from 26% in Q1 2023 to 40% in Q1 2024. This signifies changing consumption patterns and hints at opportunities emerging in the sector from the steady demand diversification.” says Vijay Ganesh, Managing Director, Industrial & Logistics Services, Colliers India.

Both retail and E-commerce segment witness over 2X surge in leasing

E-commerce segment has seen robust growth post Covid-19 and witnessed 2.3X times leasing during Q1 2024 compared to the same period in 2023. With increased focus on digital infrastructure and changing consumption patterns, E-commerce segment is further likely to warm up and create more demand for warehouses. Moreover, the rise of Q-commerce players is also likely to catalyze demand for bigger hub-warehouses.

Warehousing space uptake by retail players also witnessed heightened traction in Q1 2024 and witnessed more than twice the demand a year ago. The expansionary activity is being driven by strong retail activity across cities, especially in large department stores. Favorable consumption pattern has the potential to translate into healthy demand for warehousing space in the upcoming quarters.

Large sized deals account for over 50% of the industrial & warehousing space demand

During Q1 2024, large deals (>200,000 sq ft) accounted for 51% of the demand, a significant rise from about 40% share during 2023. Amongst these larger deals, 3PL companies continued to account for the bulk of share. However, the rise in share of large deals was driven by large space uptake, particularly by retail and E-commerce players during the quarter. Chennai followed by Mumbai dominated the proportion of large-sized deals across the top five cities.

“While the average quarterly industrial and warehousing space demand in the last two years has been at around 6 mn sq ft, average incremental supply has been comparatively lower. With continued healthy leasing activity in last few quarters, developer confidence seems to have significantly improved. With a Grade A supply pipeline of about 23-25 mn sq ft for the year 2024, supply is likely to closely follow demand trend across the top five cities of the country. Overall, an upbeat start to the year holds potential to translate into a healthy performance by the industrial & warehousing sector in 2024.” says Vimal Nadar, Senior Director & Head of Research, Colliers India.

top 5 deals for Q1 2024-

Source: Colliers

Note: Data pertains to Grade A buildings for top five cities- Bengaluru, Chennai, Delhi NCR, Mumbai and Pune

Vacancy levels largely remain rangebound amidst rising supply and healthy demandSupply infusion during the quarter was almost in line with the leasing activity, indicating improved developer confidence for the industrial and warehousing sector. At 11% by the end of first quarter, vacancy levels however increased by 120 bps as compared to Q4 of last year on account of churn and exits in the industrial and warehousing space. Amidst healthy demand and supply, rentals remained rangebound and rose by about 8% in select micro markets of Chennai and Pune.

Also Read: USD10 Bn investments to be deployed in data centers; stock set to double by 2026

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·       Demand from 3PL players continues to remain strong at around 40% share in 2023

·       Compared to 2022, FMCG segment saw over 2.5X times leasing activity in 2023

·       Q4 2023 saw the highest ever quarterly leasing in the last two years

·       In line with demand, 2023 witnessed higher supply infusion at 23.2 mn sq.ft.

With 25 mn sq ft of gross leasing in 2023, industrial & warehousing demand across the top five cities remained resilient, witnessing a marginal 2% annual growth. While H1 2023 was relatively subdued, leasing activity picked up in the second half of the year, with H2 2023 witnessing a 26% rise on a half yearly basis. During the year, Pune led the demand with 25% share closely followed by Mumbai at 22%. Interestingly, with more than 5 mn sq ft of gross absorption, Chennai saw industrial and warehousing leasing demand almost at par with Delhi NCR, the usual front runner.

Across the top five cities, Bhiwandi micro market in Mumbai was the most active market followed by Chakan-Talegaon in Pune. The two micro markets together accounted for about 42% share in demand during the year. Third-party logistics players (3PL) continued to be the top occupiers of industrial and warehousing space, contributing to about 40% in the total warehousing demand. 3PL space uptake was driven by healthy activity in Mumbai and Chennai particularly. Concurrently, leasing by FMCG players remained healthy in 2023 with more than 2.5X times activity as compared to 2022. Meanwhile engineering and automobile players continued to occupy a significant portion of the leasing pie.

Trends in Grade A Gross absorption (mn sq ft)

Source: Colliers

Note- Data pertains to Grade A buildings.

Trends in Grade A Supply (mn sq ft)

Source: Colliers

Note- Data pertains to Grade A buildings

“The industrial and warehousing sector not only remained buoyant but emerged stronger in the second half of 2023. While the quantum of leasing by 3PL players continued to remain intact, there was accelerated growth in demand from FMCG, retail and automobile segments, with more than 30% YoY rise in each segment. Going ahead, with the rise in use of Electric Vehicles (EVs) and continuous development in associated infrastructure, the warehousing demand for automobile segment, is expected to grow manifold. With increasing footfalls in malls and physical stores, retail consumption is likely to increase, which in turn would spur higher demand for warehousing spaces. Overall, backed by rising manufacturing output, capital investments, demographic consumption patterns and supportive government policies, 3PL, engineering, automobile, retail and e-commerce segments will continue to see significant momentum in the next few years.” says Vijay Ganesh, Managing Director, Industrial & Logistics Services, Colliers India.

The final quarter of 2023 saw the highest ever quarterly leasing in the last two years

The final quarter of 2023, saw about 7.7 mn sq ft of leasing, a 19% YoY rise and the highest ever quarterly leasing in the last two years. Leasing activity during the quarter was significantly higher than the average 6.2 mn sq ft quarterly leasing of the last two years (2022 & 2023). Interestingly, with about 1.6 mn sq ft of leasing during Q4 2023 Chennai saw over 2.5X times activity as compared to Q4 2022. NH48 and NH-16 micro markets of Chennai saw the bulk of the demand during the quarter, largely driven by occupiers from engineering and 3PL players. While 3PL segment continued to dominate demand during the year, leasing by engineering firms surpassed 3PL segment during the final quarter of 2023.

Large sized deals account for about 40% of the total leasing

During 2023, large deals (>200,000 sq ft) accounted for about 40% of the demand. Amongst these larger deals, 3PL companies continued to account for the bulk of share, followed by engineering and FMCG players. Mumbai followed by Chennai dominated the chunk of large-sized deals across the top five cities.

“Historically, Delhi NCR and Pune have been driving the industrial and warehousing space demand in India. However, 2023 saw a more balanced distribution of leasing activity across the top 5 cities. While Pune was the frontrunner of industrial and warehousing space uptake in 2023, demand in Mumbai, Chennai and Delhi-NCR was almost at similar levels. Pune, particularly, was the only city to witness consecutive years of demand growth (2022 & 2023). Grade A space uptake in the city was largely driven by engineering and automobile players with about 25-30% share each, surpassing the leasing activity of 3PL players comfortably. All micro markets in the city saw about 2-8% growth in rentals with Talegaon and Hinjewadi recording the highest appreciation in rental values. Looking at the current market fundamentals, the city is poised to grow further in the next few years and will play a key role in demand diversification of the overall India industrial & warehousing market.” says Vimal Nadar, Senior Director & Head of Research, Colliers India.

Vacancy levels remain rangebound amidst rising supply and healthy demand

With 21% YoY rise, the year saw about 23.2 mn sq ft of new supply indicating improved developer confidence and an optimistic outlook for the next year. Aided by healthy demand, vacancy levels too largely remained steady registering only a 60 basis points (bps) YoY rise. On similar lines of demand, the final quarter saw the highest influx in supply at 6.4 mn sq ft, led by Pune and followed by Delhi NCR. Amidst healthy demand and supply, rentals remained rangebound on a quarterly basis; however, rose by up to 5% in select micro markets of Chennai and Pune.

Trends in Grade A Vacancy rate (%)

Also Read: Industrial & Warehousing demand during Jan-Sept 2023 stable at about 17 mn sq ft

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With continued progress in infrastructure developments, we expect the absorption in 2023 to match that of 2019, which marked a four-year high.

Shrinivas Rao, FRICS, CEO, Vestian, “The Indian warehousing and logistics sector is sailing through global headwinds on the back of strong and sustainable fundamentals. Several mega infrastructure projects are planned across the country to improve connectivity and reduce transit time.”

NCR commanded the highest share at 31% of the total absorption during H1 2023, which increased from 21% a year earlier. This indicates a robust demand for warehousing and logistics facilities in and around Delhi, Noida, and Gurugram which are prominent commercial and industrial hubs. Western cities of India, Mumbai and Pune, accounted for 42% of the total absorption during H1 2023, increasing from 35% in H1 2022. This could be attributed to the higher demand for warehousing facilities in these cities.

The micro-markets of Bengaluru and Hyderabad witnessed a drop in demand for warehousing facilities due to the limited supply of Grade A warehouses in the regions during the analysis period.

Micro-markets of NCR quoted the highest weighted average rentals of INR 22.5/sq ft/month, complementing the region’s highest absorption amid strong demand and a competitive market. Therefore, the weighted average rentals increased by 4% within a year. Bengaluru closely followed the NCR market with INR 22.0/sq ft/month, showcasing the city’s prominence in the logistics sector.

3PL companies continued to be the major demand driver in H1 2023 with 26% of the total share. Engineering & manufacturing and FMCG companies accounted for 16% and 11% share respectively.

Despite sustained leasing activities during H1 2023, institutional investments were reduced by 69% over H1 2022, as we saw investors opt for wait-and-watch mode amid global uncertainty. However, the trend for overall institutional investments remains the same.

Shrinivas Rao further stated, “Vertical stacking and in-city warehousing are gaining prominence to improve efficiency and reduce cost. There is a focus on ESG factors within the sector which again is in alignment with clients’ environmental and social objectives and goals.”

The emergence of tier-2 cities as warehousing hubs and extensive use of AI and ML technologies to improve efficiency may shape the future of the warehousing and logistics sector in India. Additionally, the ‘Make in India’ campaign and ‘China plus One’ strategy coupled with upcoming mega infrastructure projects may provide impetus to the Indian manufacturing industry, leading to an increase in demand for warehouses.

Also Read: Industrial & Warehousing demand in India stable at 11 mn sq ft in H1 2023

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Bengaluru is likely to witness a surge in investment for developing premium warehousing park to meet growing demand for storage space from e-commerce and third-party logistics players, according to a white paper named ‘Ahead of The Curve – Bengaluru Warehousing’ by India Sotheby’s International Realty with inputs from India’s leading real estate data research company CRE Matrix.

The demand-supply trend of the last five calendar years (2018-22) shows that demand has outstripped new supply by far, resulting in very low vacancy levels in existing warehousing parks and a decent growth in rentals.

According to white paper data provided by CRE Matrix, the cumulative absorption of warehousing space in Bengaluru during the 2018-22 period stood at 16.34 million square feet, while new supply was 10.5 million square feet.

“Bengaluru will be in the spotlight for investments in warehouses with greater capacity for e-commerce fulfilment. Based on the anticipated rise in demand, we project that more than 250 acre of land would be required in the periphery of Bengaluru city to develop new warehousing facilities,” said Gagan Randev, Executive Director – Capital Markets, India Sotheby’s International Realty.

Another significant trend observed in the market is the notable and recent rise in market rentals within the sector.  In 2022, market rentals experienced a remarkable increase of 10%, surpassing the average rental hikes of 5-6% witnessed in previous years.

“This upward trajectory indicates a further tightening of the market. As a result, owners have gained the advantage of negotiating more favourable rental terms with new occupiers. The considerable rise of 10% in market rentals, compared to the in-place rental increase of 2% in 2022, clearly reflects this positive trend,” opined Harikesh Ananthamurthy, Senior Vice President – Capital Markets, India Sotheby’s International Realty.

He further said manufacturing, logistics players, e-commerce, and retail sectors will continue to drive the warehousing demand, with logistics players and e-commerce emerging as major occupiers.

Mr Randev added: “The involvement of larger organized players in the sector has driven a shift towards automation, IoT integration, enhanced warehouse management systems, security measures, and a focus on creating greener and sustainable built environments.”

Prominent players such as All Cargo, Welspun, IndoSpace, Prologis, Panattoni, RMZ, The House of Hiranandani, Lodha (Macrotech), ESR, CapitaLand, Morgan Stanley, Horizon Industrial Parks, and Greenbase are aggressively expanding their presence in the warehousing segment. Partnerships between funds like Blackstone and Prologis with strong domestic players have overcome land challenges and facilitated the acquisition of large parcels in an organized manner.

The paper further said the demand for land in Bengaluru is expected to be evenly distributed among different clusters, facilitated by the city’s expansion and peripheral ring road, allowing for seamless transfer between clusters and consumption centres.

India Sotheby’s International Realty said organized large players are acquiring land with long-term demand in mind, facing challenges in availability and conversion. Valuation depends on expected earnings, construction costs, and approval expenses. The sector sees a drive towards automation, IoT, better warehouse management, security, and sustainability.

Landowners, it added, often have high expectations and asking prices, and valuation depends on anticipated earnings from warehousing rentals, construction costs, and approval expenses.

Also Read: Bengaluru’s Key Areas See Housing Rents Grow Over 20% Y-o-Y in Q1 2023, Beat Other Cities

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·       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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Delhi-NCR led the demand during 2022 with a 36% share, followed by Pune at a 23% share in total leasing backed by robust demand from 3PL, engineering & electronics players. Tauru road and Luhari saw a majority of the demand in Delhi-NCR, while Bhamboli continued to attract industrial and warehousing occupiers in Pune.

Trends in Grade A Gross absorption (mn sq ft)

Source: Colliers | Note: Data pertains to Grade A buildings

Trends in Grade A Supply (mn sq ft)

Source: Colliers |Note: Data pertains to Grade A buildings

“The fundamentals remain strong for India’s Industrial demand and Production Linked Incentive (PLI) schemes announced for key sectors by the government are expected to further boost local production fueling demand for organized industrial spaces and warehousing facilities.  China plus one strategy is gaining more vigour and global companies are keen on shifting their manufacturing focus to India as part of their de-risking strategy. This would be a key trend to watch out for this year. 

The Indian Logistics growth story continues to remain resilient and is further progressing on an accelerated growth trajectory owing to the focus on companies catering to changing consumer behavior across India. The convenience of shopping/returns, improved UPI adoption, omnichannel retailing, etc. have led to e-commerce demand growth thereby translating into demand for more warehousing capacities especially to augment last-mile connectivity in Tier I and Tier II cities this year.” says Shyam Arumugam, Managing Director, Industrial & Logistics Services, Colliers India.

During 2022, demand from engineering and electronics firms surged more than 2X (YoY), while their share in the leasing pie rose from 13% in 2021 to 28%. About 70% of leasing in engineering and electronics were large-sized deals (>1,00,000 sq ft) as they ramped up their operations across cities. Delhi-NCR and Pune were the most preferred locations for these firms.

“Large deals (deals > 100,000 sq ft) contributed about 70% of the demand during 2022. Amongst the larger deals, the share of 3PL, engineering and electronics companies remained the highest. Demand from engineering and electronics is picking pace with a rise in consumption and easing of supply chain bottlenecks. We expect engineering and electronics companies to continue to take up larger spaces in the next few quarters as fundamentals remain strong.” says Vimal Nadar, Senior Director, Research Colliers India.

While demand remained robust in 2022, the markets remained restricted with supply. During 2022 there was about 19 mn sq ft new supply, a 20% decline YoY. Developers went slower with new supply as the cost of construction remained volatile during the year. They remained cautious and awaited pre-commitments. Consequently, this led to a drop in vacancy levels amidst robust demand. Overall vacancy levels lowered by 2.4pp during the year and stood at 9.4%. With limited new supply and robust demand, rentals across the key micro markets witnessed an increase in 2022. 

Supply is likely to remain under check, thus rents are likely to firm up in the next few quarters. However, this would largely depend on how the economic & business environment would pan out. Going ahead, there will be a greater focus on sustainability and adoption of technology to bring in greater operational efficiency.

Also Read: Mirae Asset Acquires Grade-A Warehousing Space in India

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Demand remained resilient during the third quarter as well, at 6.7 mn sq ft, highest since Q1 2021. Third-party logistics players (3PLs) remain by far the top occupiers of warehousing space, contributing to over half of the total warehousing demand till date. Improved retail market sentiment amidst festive season and higher online spending continue to support warehousing growth and is expected to add to short-term demand addition.

Delhi-NCR led the demand during YTD 2022 at 39% share, followed by Pune at 21% share in total leasing backed by robust demand from 3PL players, Engineering & E-commerce players. Tauru road and Luhari remained the most active micro-markets in Delhi-NCR, while Chakan-Talegaon continued to attract industrial occupiers in Pune.

Trends in Grade A Gross absorption (mn sq ft)

Trends in Grade A Supply (mn sq ft)

“Continued leasing momentum is expected in the warehousing segment with various retail clients in active discussion to consolidate their footprints in large-size mega distribution centres. As far as the macro environment, the unveiling of the National Logistics Policy by the honourable Prime minister is one of the key milestones for this sector and is expected to have a great positive impact on the logistics sector in the medium to long term. Large deals will continue to drive the warehousing market as e-commerce and 3PL players plan remarkable expansion to enhance efficiency”, said Shyam Arumugam, Managing Director, Industrial & Logistics Services, Colliers India.

New supply weakened during YTD2022 at 15 mn sq ft, declining by 20% YoY as developers remained cost cautious waiting for input pricing to reduce further and this leads to delay in project completions. Amidst moderate supply and robust demand for industrial and warehousing facilities, overall vacancy levels lowered by 0.7pp during the quarter. Rents are likely to firm up in the next few quarters across preferred micro markets in key cities owing to strong demand and limited availability of quality supply.

“India’s warehousing sector is gradually picking up pace with massive growth in 3^rd party logistics. 3PL players contributed to half of the total warehousing demand during YTD2022 with an average deal size of 1.1 lakh sq ft. About 75% of the leasing by 3^rd party logistics was through large sized deals.” says Vimal Nadar, Senior Director, Colliers India. 

Also Read: Real Estate PE Investments Log 40% Annual Rise in 1H FY23

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