India’s Industrial and Warehousing Sector Experiences Strong Demand in H1 2024
The industrial and warehousing sector in India has witnessed a significant surge in demand during the first half of 2024, with about 13 million sq ft of leasing activity and a 17% year-on-year growth. This positive trend has been evident across the top five cities, with Chennai and Delhi NCR leading the demand, accounting for nearly half of the overall leasing in this period.
Strong Growth Driven by Third Party Logistics (3PL) Players
Third-party logistics (3PL) players continue to dominate the warehousing space, contributing to about 36% of the overall demand during H1 2024. The increased demand in Chennai, almost double compared to the same period last year, can largely be attributed to the warehousing requirements of 3PL players.
Micro Market Analysis
At a micro market level, Bhiwandi Mumbai, Chakan-Talegaon Pune, and Oragadam Chennai witnessed an uptake of more than 1.5 million sq ft each in warehousing space. These locations have become attractive for businesses due to their strategic positioning and logistics capabilities.
Quarterly Demand Showcased Impressive Growth
Q2 2024 alone recorded about 6 million sq ft of industrial and warehousing demand across the top five cities, indicating a remarkable 48% year-on-year rise. Delhi NCR emerged as the leader in quarterly demand, with 1.8 million sq ft of leasing and a 30% share. Farukhnagar and Sonipat were the primary micro markets driving demand in the region.
Vijay Ganesh, Managing Director of Industrial and Logistics Services at Colliers India, comments, “Considering the healthy demand across major cities and supportive government policies, developers have been investing in high-quality warehousing facilities equipped with advanced features. With a significant number of completions in the first half of 2024, we can expect a Grade A supply infusion of 20-25 million sq ft over the course of the year.”
Opportunity Across Different Industry Segments
Apart from 3PL players, players from engineering, FMCG, and electronics segments also showcased significant demand for warehousing spaces, with each segment accounting for a share of 12-16%. It is worth noting that engineering and electronics segments witnessed more than 1.7 times the leasing activity recorded in H1 2023.
Supported by industry-specific policies and regulatory frameworks, diverse segments are expected to contribute to the growth of the industrial and warehousing space in India.
Increased Vacancy Levels and Rise in Supply
While the supply of Grade A warehousing spaces has exceeded demand, India’s vacancy levels saw a rise of 210 basis points on an annual basis, reaching 12.2% at the end of H1 2024. Developers’ anticipation of heightened demand in the coming quarters has resulted in a fresh supply of 14.4 million sq ft in H1 2024, reflecting a 35% year-on-year increase. Delhi NCR contributed the most to this supply with approximately 5.7 million sq ft of new industrial and warehousing developments.
Strong Quarter of Completions and Rising Rentals
Q2 2024 stood out as the highest quarter in terms of supply infusion in the last two years, witnessing about 7.5 million sq ft of completions in the top five cities of India, representing a 53% year-on-year increase. Rental prices in key micro markets have also experienced meaningful growth amidst the healthy demand and high-quality supply infusion.
Large Deals and City-Specific Demand
Large deals exceeding 200,000 sq ft accounted for approximately 35% of the demand during H1 2024. While many of these larger deals were made by 3PL players, electronics and FMCG occupiers also had significant warehousing space requirements. Chennai and Delhi NCR emerged as the leading cities for these large-sized deals.
The industrial and warehousing sector in India is experiencing a robust growth trajectory, driven by strong demand from 3PL players and various industry segments. With quality supply infusion and government support, the sector is poised for further expansion in the coming quarters.
