Delhi NCR and Chennai were the driving forces behind this growth, collectively accounting for more than half of the overall leasing activity. Delhi NCR, in particular, saw a significant increase in demand, with a 156% rise in Q3 2024 compared to the same period last year. Chennai, too, saw an impressive YoY increase of 17%, cementing its position as a key hub for industrial and warehousing activities.

Key Demand Drivers: 3PL, Engineering, and FMCG Sectors

The demand for industrial and warehousing space was predominantly led by Third Party Logistics (3PL) companies, which accounted for 35% of the total leasing activity in 2024. Engineering and Fast-Moving Consumer Goods (FMCG) sectors also contributed significantly, together accounting for 32% of the space uptake during the year.

“The demand from engineering firms was notably strong in both Chennai and Delhi NCR, while the FMCG sector continued to show resilience,” said Vijay Ganesh, Managing Director of Industrial & Logistics Services at Colliers India. “The rise of Q-commerce and heightened demand from the electronics sector, which saw a twofold increase in leasing compared to 2023, are also contributing to this growth.”

Grade A Supply on the Rise

In tandem with the demand surge, supply of Grade A industrial and warehousing space also grew significantly, with 22 million sq ft of new space coming online in the first three quarters of 2024—a 29% increase from the previous year. Delhi NCR alone accounted for 35% of this new supply, with approximately 7.6 million sq ft of completions.

Despite this influx of supply, overall vacancy levels remained stable at around 12-13%, highlighting a favorable demand-supply dynamic in the market.

Quarterly Trends and Large Deals

In Q3 2024, the industrial and warehousing sector saw an 18% YoY increase in leasing activity, with 7.3 million sq ft of space being absorbed across the top five cities. Delhi NCR continued to dominate this quarterly activity, accounting for nearly one-third of the demand, primarily driven by large deals in the Bhaproda and Kulana micro-markets.

Large-sized deals, particularly those exceeding 200,000 sq ft, played a significant role in the market. In fact, large deals accounted for 40% of the total leasing activity during the first nine months of 2024. Key transactions included deals by global logistics giant DHL in Bhiwandi, and a notable leasing by DMart in Delhi NCR’s Kulana micro-market.

Outlook for the Future

With the ongoing festive season and increasing demand for quality industrial and warehousing spaces, experts anticipate that 2024 could close with a record leasing volume, potentially surpassing 25-30 million sq ft. The strong demand, coupled with supportive government policies, improving logistics efficiencies, and India’s growing role as a global manufacturing hub, is expected to maintain momentum in the sector.

“Given the healthy demand and the confidence among developers, we expect 2024 to end on a high note, with leasing activity reaching historic levels,” said Vimal Nadar, Senior Director and Head of Research at Colliers India.

As the industrial and warehousing sector continues to evolve, the focus is shifting towards sustainable and technologically advanced Grade A spaces, meeting the growing expectations of tenants in sectors such as electronics, retail, and logistics. This shift, combined with a strong pipeline of new supply, is poised to further fuel the sector’s growth in the coming years.

Also Read: Industrial & Logistics Sector Dominates Private Equity Investments in H1 FY25: ANAROCK Capital Report

The post Industrial & Warehousing Demand Sees Robust Growth in 2024, Surpassing 20 Million Sq Ft of Leasing appeared first on Square Feat India.

·       Technology led leasing during Q1 2024 at 23% share, followed by Engineering & manufacturing at 21% share

·       Vacancy levels remained rangebound; rentals rose up-to 8% YoY across major markets

The first quarter of 2024 has started on a strong note, registering total leasing of 13.6 million square feet across the top 6 cities, marking a remarkable 35% increase compared to the same period last year. Although this is a significant drop from the record office space take-up in the last quarter of 2023, the remarkable annual increase is indicative of upbeat occupier sentiment, given the fact that the first quarter is typically slower. Bengaluru and Hyderabad emerged as frontrunners for demand of Grade A office space in Q1 2024, cumulatively accounting for more than half of the India leasing activity. The office market of Hyderabad especially demonstrated a strong momentum with 2.2x space uptake in Q1 2024 as compared to the corresponding quarter last year. This demand was driven by Healthcare & Pharma and Technology sectors. Amongst other major office markets, Mumbai too experienced a notable surge in leasing activity, an impressive 90% YoY rise in Q1 2024.

“Hyderabad continues to strengthen its role as a prominent commercial office market in the country. The city offers occupiers including Global Capability Centers considerable price arbitrage compared to other markets. Furthermore, proactive government policies, continuous infrastructure upgrades and a favorable business ecosystem makes Hyderabad a compelling destination for investors, occupiers, and leading developers of commercial real estate in India. Within Hyderabad, the trifecta of Hi-Tec City, Gachibowli and Madhapur continued to drive leasing activity in Q1 2024. Of the 2.9 million square feet of Grade A space uptake in the first quarter, over 80% of the demand was concentrated in these three localities.” says Arpit Mehrotra, Managing Director, Office services, India, Colliers.

Trends in Grade A gross absorption (in million sq feet)

Source: Colliers

Note- Q1: 1^st January to 30^th March of the year

Gross absorption: does not include lease renewals, pre-commitments and deals where only a letter of Intent has been signed.

Top 6 cities include Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai, and Pune

During Q1 2024, new supply across top 6 cities remained steady, at 9.8 million square feet, almost at par with the level seen in Q1 2023.  Bengaluru witnessed significant new project completions, contributing to 45% of the total new supply, followed by Hyderabad at 27% share. With demand outpacing supply, average rentals saw up to 8% uptick on a YoY basis across most of the major markets. Vacancy levels, meanwhile, are expected to remain steady, hovering around 17.3% by the end of Q1 2024.

Trends in Grade A new supply (in million sq feet)

Source: Colliers

Note- Q1: 1^st January to 30^th March of the year

Top 6 cities include Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai, and Pune

Technology, Engineering & Manufacturing and BFSI sectors drove space uptake in Q1 2024

“Driven by strong domestic occupier activity across Technology and Engineering & manufacturing sectors, the first quarter of 2024 signals a strong start for India’s office market. During Q1, occupiers from Technology, Engineering & Manufacturing, and BFSI sectors collectively accounted for 58% of total leasing activity across the top 6 cities. This momentum, coupled with the resurgence in GCC demand, sets the stage for the rest of the year. Healthy demand supply dynamics are likely to prevail throughout 2024. As business sentiments and economic outlook remains positive, domestic occupiers, especially will continue to drive the office market of the country.” says Vimal Nadar, Senior Director and Head of Research, Colliers India.

During Q1 2024, the demand for office space across the top 6 cities continued to remain broad-based. At 2.8 million square feet, Engineering & manufacturing leasing soared to over 2.3x times in Q1 2024 compared to the first quarter of 2023. Bengaluru accounted for about 55% of the activity in the sector, underscoring occupiers’ continued preference for the market. BFSI and Flex space too continued their healthy space take up across most cities, garnering 14% and 13% share, respectively in overall India leasing for Q1 2024.

Sector-wise Pan India leasing (in msf)

Source: Colliers

Note: Others includes Logistics, Media & Telecom etc.

Data pertains to Grade A only

Key deals Q1 2024 Hyderabad

Source: Colliers

Also Read: Leasing demand for manufacturing space surge, expected to reach ~16 million sq. ft by 2024 

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