In the second quarter of 2023, India’s industrial and warehousing sector experienced a 12 percent decline in leasing demand, with a total of 40 lakh square feet leased across five major cities, as reported by real estate firm Colliers India. The contrasting trend showcased a rising demand for warehouses in Bengaluru, Pune, and Mumbai, while Delhi-NCR and Chennai witnessed a significant drop in demand.
Bengaluru took the lead with a remarkable 17 percent increase, leasing 7 lakh square feet of warehouse space. Similarly, the Pune region recorded a 15 percent surge, leasing 10 lakh square feet, while Mumbai experienced a 12 percent rise, securing 9 lakh square feet of warehouse space in the same period.
On the other hand, Delhi-NCR saw a staggering 49 percent decline in demand, leasing only 7 lakh square feet, while Chennai experienced a 28 percent dip, leasing 7 lakh square feet during the three months ended June 30.
Despite these variations, the overall demand across the top five cities remained stable during the first half of 2023, with 11 million square feet of warehouse leasing, a figure similar to the previous year’s data.
Leading the pack was Delhi-NCR, accounting for a 25 percent share of the leasing market, closely followed by Mumbai, with a share of 24.6 percent. The expansion in the third-party logistics (3PL) sector played a crucial role in driving the demand, representing 37 percent of the total leasing in the first half of 2023. Additionally, the FMCG and engineering firms also contributed significantly, with a share of 12 percent and 11 percent, respectively.
Vijay Ganesh, the Managing Director of Industrial & Logistics Services at Colliers India, noted that while the 3PL sector continued to lead in demand, leasing by FMCG and engineering firms witnessed a notable rise during the first half of 2023.
The e-commerce industry experienced a remarkable 68 percent year-on-year surge in demand after a few quarters of sluggishness. This overall increase in demand was attributed to factors like expanded production capacity, strong government policy support, and the integration of more automated and process-driven manufacturing.
Vacancy levels for quality Grade A warehousing also saw a decline, dropping by 110 basis points (bps) to 10 percent during the second quarter, showcasing steady demand for such facilities.
In terms of supply, the second quarter of 2023 saw a 10 percent year-on-year decrease, with a fresh supply of 10.7 million square feet, as developers cautiously monitored the evolving demand scenario.