Strong Growth in Industrial & Warehousing Demand in Top Indian Cities
The industrial and warehousing sector in India experienced robust growth during the first half of 2024, with leasing activity reaching approximately 13 million sq ft. This represents a 17% year-on-year (YoY) increase, highlighting the healthy demand in this sector across the top five cities.
Chennai and Delhi NCR were the key drivers of this growth, accounting for nearly half of the total leasing activity in H1 2024. Interestingly, Chennai witnessed a doubling of demand compared to the same period in 2023, primarily driven by the warehousing requirements of Third Party Logistics (3PL) players.
Rise of 3PL Players
3PL players are emerging as the top occupiers of warehousing space, contributing to approximately 36% of the overall demand during the first half of the year. Their role in the industry is crucial, and they continue to dominate large-sized deals (>200,000 sq ft) in major cities such as Chennai and Delhi NCR.
New Developments and Technologies
Recognizing the robust demand and favorable government policies, developers are investing in high-quality warehousing facilities that incorporate advanced technological features. Up to 20-25 million sq ft of Grade A warehousing supply is expected to enter the market in 2024, which bodes well for the sector’s growth.
Demand has not only been driven by 3PL players but also by engineering, FMCG, and electronics companies with a 12-16% share each. Leasing activity in these sectors has seen significant growth, with leasing activity in engineering and electronics surpassing 1.7 times that of H1 2023.
Increased Vacancy Levels and Rising Supply
Despite the growing demand, India’s overall vacancy levels have risen by 210 basis points YoY and currently stand at 12.2% at the end of H1 2024. This increase can be attributed to the infusion of supply exceeding demand for Grade A warehousing spaces.
Developers’ anticipation of continued demand has led to a surge in the completion of industrial and warehousing developments, with H1 2024 witnessing a 35% YoY rise and Delhi NCR accounting for 40% of the new supply.
Uptick in Rentals and Large Deals
Driven by healthy demand and high-quality supply, rentals in key micro markets have experienced an appreciable uptick. During H1 2024, large deal sizes exceeding 200,000 sq ft accounted for 35% of the total demand, with a majority coming from 3PL players. However, the electronics and FMCG sectors also had significant warehousing space requirements, indicating a growing trend across diverse segments.
Pioneered by Chennai and Delhi NCR, these large-sized deals demonstrate the strength of the industrial and warehousing sector in these cities and highlight the key players driving the market’s growth.
In conclusion, the industrial and warehousing sector in India is experiencing robust growth, with Chennai and Delhi NCR leading the demand. The dominance of 3PL players, coupled with increased demand from engineering, FMCG, and electronics segments, is driving the industry forward. With supply infusion exceeding demand, vacancy levels have increased, leading to a notable rise in new supply. An appreciable uptick in rentals and the prevalence of large-sized deals further underscore the strength of the market.
