industry

Industrial and warehousing sector witnessed absorption of around 11 mn sq ft in Q1 2023: Report


Industrial and warehousing sector witnessed absorption of around 11 mn sq ft in Q1 2023 with tier I cities accounting for 77% of the absorption, while tier II and III cities accounted for the remaining 23%, according to a report by Savills India.

The report suggests that the sector witnessed a fresh supply of 12.4 mn sq ft in the same period, of which 9.2 mn sq. ft (74%) was from tier I cities and 3.2 mn sq. ft (26%) from tier II and III cities.

Additionally, the market is witnessing a surge in new projects that boast of improved specifications and high-quality environmental, health, and safety (EHS) standards. This trend has led to a consistent increase in the percentage of grade A supply across cities in recent years. In Q1 2023, grade A space accounted for 52% of both the total absorption and supply in the market, highlighting the significant demand for quality space.

Over the years, five cities have consistently contributed the most to industrial and warehousing segment absorption in India: Delhi-NCR, Mumbai, Bengaluru, Chennai, and Pune. In Q1 2023, Delhi-NCR remained at the top with the highest absorption rate of 19%, closely followed by Mumbai with 14%. Bengaluru and Chennai recorded absorption rates of 9% and 8%, respectively. Together, Tier II and Tier III cities accounted for 23% of the total absorption.

“The industrial and logistics sector is poised for significant growth in 2023, with a projected absorption of over 40 mn sq. ft. This demand is expected to be driven by emerging Tier II and III cities, a growing need for urban warehousing, and a major transformation in the Indian manufacturing sector. The shift is further supported by the Performance Linked Incentives (PLIs) and efficient multimodal connectivity plans designed for local and global distribution purposes.” said Srinivas N, Managing Director, Industrial and Logistics, Savills India.

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Over the last 2-3 years, the 3PL sector has been a major contributor to the growth of the warehousing industry, accounting for 40-50% of the total demand. The manufacturing sector has also gained momentum, with increased activity supported by various incentive schemes, including the PLI.

In the first quarter of 2023, the 3PL sector continued to be the driving force behind warehousing demand, accounting for 40% of total absorption. The manufacturing sector followed closely behind, accounting for 23%, with the retail sector at 11% and FMCG/FMCD at 7%.



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