The Industrial & Warehousing sector reached new heights in 2024, with demand and supply both hitting unprecedented milestones. According to Savills India, a leading global real estate advisory firm, absorption surged by 30% year-on-year to reach 64.5 million sq. ft., while fresh supply recorded a 15.8% growth, totalling 71.8 million sq. ft.
**Key Drivers of Growth: 3PL, Manufacturing, and E-commerce**
The remarkable growth was driven by sustained demand from the 3PL and manufacturing sectors, along with a significant uptick in interest from the FMCG, FMCD, and e-commerce segments. Tier-I cities dominated absorption, accounting for 77% of the total, with Tier-II and Tier-III cities contributing the remaining 23%.
**Supply Dynamics: Tier-I Cities Lead the Way**
On the supply front, the sector delivered 71.8 million sq. ft., with Tier-I cities contributing a substantial 56.8 million sq. ft. (79%) and Tier-II and Tier-III cities adding 15 million sq. ft. (21%). This robust delivery across cities reflects the market’s alignment with growing demand.
**ESG Standards Drive Demand for Grade-A Spaces**
Over the past 3-4 years, the demand for compliant Grade-A spaces has risen significantly, driven by shifting occupier preferences to align with ESG (Environmental, Social, and Governance) standards. As a result, Grade-A supply increased to 55% in 2024, up from 53% in 2023.
**Sector-wise Breakdown: 3PL and Manufacturing Lead the Way**
The absorption in 2024 was primarily led by sustained demand from the third-party logistics (3PL) sector, which comprised 33% of total absorption, alongside manufacturing at 22%. Notably, there was a significant rise in demand from the FMCG & FMCD sectors, contributing 16% in 2024 up from 6% in 2023.
**E-commerce Gains Traction in Tier-II & III Cities**
The E-commerce segment is gaining traction, with contribution to overall absorption increasing to 10% in 2024 from 4% in 2023. The Tier-II & III cities like Coimbatore, Lucknow, Patna, Guwahati, and Indore contributed significantly to the overall absorption.
**Supply and Absorption Patterns: Delhi-NCR Leads the Way**
In 2024, Delhi-NCR maintained its lead, contributing 19% to the total supply, followed by Mumbai and Bengaluru, each with 13%. Tier-II and Tier-III cities together accounted for 21% of the total supply. In terms of absorption, Delhi-NCR again led with 15%, followed by Mumbai at 13%, and Bengaluru at 12%.
**Rental Values and Yields: Modest Growth Observed**
Rental values for compliant buildings saw a modest increase across cities, with yields remaining stable. This rise in rental values was driven by higher land costs and a surge in construction expenses. Rental growth in 2024 ranged from 1% to 6%, depending on the city and location.
