Industrial Warehousing Demand : July 25, 2023: According to a Colliers India research, the demand for industrial and warehouse space in India’s top five cities remained consistent during the first half of 2023 (H1 2023) with 11 million square feet (msf) of leasing, compared to the same time in the previous year (H1 2022). Mumbai came in second with a 24.6% share, closely after Delhi-NCR’s 25% market share. While demand changed by a single digit percentage in the majority of the cities, Mumbai recorded a remarkable 28% YoY rise in leasing during H1 2023.

3PL operators, who accounted for 37% of all leasing in H1 2023, were principally responsible for the steady rise in leasing. FMCG companies and engineering businesses were in second and third, with shares of 12% and 11%, respectively. Despite the fact that 3PL players generated demand throughout the time period, their proportion of leasing fell to 37% from 53% in H1 2022. At the same time, FMCG companies saw a striking three-fold increase in leasing as they increased their footprint in important areas like Mumbai and Delhi NCR.

“While 3PL continues to lead demand, leasing by FMCG and engineering firms across the major markets in India witnessed a significant rise during the first half of 2023,” said Vijay Ganesh, managing director, industrial and logistics services, Colliers India. Notably, following a pause in recent quarters, e-commerce demand increased 68% YoY. A number of reasons, such as expanded production capacity, strong government policy backing, and the incorporation of more automated and process-driven manufacturing, have helped to boost the overall demand for the industrial and warehousing industry. Although the demand is expected to be dominated by 3PL players, we anticipate strong and consistent momentum in leasing from other categories as well.

 

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Trends in grade-A gross absorption in top 5 cities

 

City	H1 2023	H1 2022	YoY change
Delhi NCR	2.8 msf	3 msf	-8%
Mumbai	2.7 msf	2.1 msf	28%
Pune	2.4 msf	2.7 msf	-9%
Chennai	1.7 msf	1.7 msf	1%
Bangalore	1.4 msf	1.5 msf	-4%
Total	11 msf	11 msf	0%

 

During H1 2023, vacancy levels decreased by 110 basis points (bps) to 10% due to a consistent demand for high-quality grade A warehouse spaces. Fresh supply during this time period was 10.7 msf, a 10% YoY decrease. The second quarter (Q2 2023) of the six-month period had slight slowdown in demand, with 4 msf of lease. Pune had a 26% share of the demand throughout the period.

“India’s high performance economic indicators are showing encouraging signs of improvement, with steady gains in manufacturing output and investment,” said Vimal Nadar, senior director and head of research at Colliers India. In the short to medium term, this portends favourably for the industry.

 

Trends in grade-A vacancy rate in top 5 cities

 

City	H1 2023	H1 2022
Delhi NCR	14.1%	16.1%
Mumbai	12.1%	11.5%
Bangalore	6.8%	6.1%
Chennai	5.6%	6.3%
Pune	5.5%	8.9%
Total	10%	11.1%

 

Trends in grade-A supply in top 5 cities

 

City	H1 2023	H1 2022	YoY change
Delhi NCR	3.7 msf	5.1 msf	-27%
Pune	2.3 msf	1.6 msf	48%
Chennai	2 msf	2.2 msf	-11%
Mumbai	1.6 msf	1.8 msf	-11%
Bangalore	1.1. msf	1.2 msf	-10%
Total	10.7 msf	11.9 msf	-10%

 

Large purchases (above 100,000 square feet) accounted for over 75% of the demand in H1 2023. The majority of these larger agreements were made by 3PL businesses, followed by FMCG and engineering firms. The majority of large-sized deals in the top five cities were concentrated in Mumbai, followed by Pune.

 

 

 

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