During the third quarter of 2023, the industrial and logistics sector exhibited robust activity, absorbing a total of 11.4 million square feet (msf), as reported by Savills India. Tier I cities dominated the transactions, constituting a substantial 78 percent share at 8.9 msf.
The manufacturing sector emerged as the primary driver behind this surge in demand, contributing significantly with a 33 percent share of the total absorption, according to a recent Savills India report.
A noteworthy aspect highlighted in the report is the introduction of fresh supply totaling 17.8 msf during Q3 2023. Among this, Tier I cities witnessed a major chunk, accounting for 14.1 msf (79 percent), while Tier II and III cities contributed 3.7 msf (21 percent). Major developers responded to the escalating demand by delivering projects across various cities, leading to this notable increase in supply.
Srinivas N, Managing Director, Industrial and Logistics at Savills India, expressed optimism about the sector’s future growth. He stated, “With developments such as industrial & dedicated freight corridors, inland waterways, along with improved infrastructure, the sector is poised for exponential growth. We expect the industrial and logistics sector to absorb in excess of 40 million sq. ft. and supply more than 45 msf in 2023.”
Examining the grade of spaces, the report indicated that overall grade A spaces comprised 54 percent of the supply and 52 percent of the absorption during the quarter. In Tier I cities specifically, grade A spaces constituted an even higher percentage, making up 62 percent of the supply and 54 percent of the absorption. This suggests a notable increase in the demand for graded and compliant buildings in Tier I cities.
The manufacturing sector continued to be a key player in driving demand during the quarter, making up 33 percent of the total absorption. Following closely, third-party logistics firms, commonly referred to as the 3PL sector, contributed significantly with a 32 percent share of the total absorption.
Delhi-NCR retained its position at the top, contributing the highest share of 31 percent to total supply, closely followed by Mumbai with a 12 percent contribution. Chennai and Bengaluru made notable contributions of 8 percent and 7 percent, respectively, to the total supply. Collectively, Tier II and III cities accounted for 21 percent of the total supply.