With people preferring to shop online more, there is a noticeable growth of e-commerce business. While e-commerce grows, directly or indirectly, it affects the growth of the warehousing industry. As per a report by Colliers, there is a 17 per cent year-on-year (YoY) in industrial and warehousing demand across the top five cities while the leasing activity in H1 2024 remains about 13 million sq feet.
Interestingly, Chennai leads the tally of demand with 88 per cent YoY change from H1 2023 to H1 2024, followed by Bengaluru with 21 per cent and Delhi with 14 per cent. In addition to this, the third party logistics (3PL) players continued to be the top occupier of warehousing space, contributing to about 36 per cent share in overall demand during the first half of the year.
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).
Vijay Ganesh, Managing Director, Industrial and Logistics Services, Colliers India, said, “On a quarterly basis, Q2 2024 saw about 6 million sq ft of industrial and warehousing demand across the top five cities, a 48 per cent rise YoY. With 1.8 million sq ft of leasing and 30 per cent share, quarterly demand was significantly driven by Delhi NCR.” He further added that the demand in the region was led by large uptake of industrial and warehousing space in Farukhnagar and Sonipat micro markets.
3PL dominates the demand!
While 3PL players continued to dominate the demand with about 36 per cent share, space uptake by players from engineering, FMCG and electronics segments was significant with 12-16 per cent 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 supply infusion exceeding demand for Grade A storage facilities, overall India vacancy levels rose by 210 basis points (bps) on an annual basis, reaching 12.2 per cent at the end of H1 2024. Developers’ anticipation of increased demand in the future quarters has resulted in new supply of 14.4 million sq ft in H1 2024, a 35 per cent YoY increase.
With about 5.7 million sq ft of new industrial and warehousing developments, Delhi NCR accounted for about 40 per cent share in overall completions in the first half of the year. Notedly, in Q2 2024, about 7.5 million square feet of construction were completed in the country’s top five cities, representing a 53 per cent YoY increase. Q2 2024 also had the largest quarterly supply infusion in the prior two years.
Moreover, large deals accounted for about 35 per cent of the demand. However, majority of these deals came from 3PL players, while 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.
“India’s industrial and warehousing market continues to grow and the momentum is likely to continue in the second half of the year. 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, catalyse demand and attract investments in the industrial and warehousing sector. Additionally, increasing platform level investments will lead to an influx of superior quality industrial and warehousing space in the next few years,” Vimal Nadar, Senior Director and Head of Research, Colliers India, added.
