Despite a relatively slower growth during H1 2023, leasing activity picked up in Q3 2023, registering a 55% QoQ growth. Pune led the demand during the nine months with a 24% share, closely followed by Mumbai at 23%, both edging ahead of the usual front-runner, Delhi NCR. Overall, Bhiwandi remained the most active micro-market in Mumbai, while Chakan-Talegaon continued to be the preferred market for industrial occupiers in Pune.
“In addition to demand driven by 3PL and retail segments, there is a surge in demand from manufacturing players led by FMCG companies, electronics, Auto & Auto ancillary, EV and Semiconductor companies. FMCG companies accounted for about 1.5 mn sq ft of absorption of industrial & warehousing space during the first three quarters of 2023, a twofold rise compared to last year. The trend is set to continue owing to support from the government for the manufacturing sector led by initiatives like PLI (Production linked Incentive) and Make in India,” says Vijay Ganesh, Managing Director, Industrial & Logistics Services, Colliers India.
Leasing by FMCG players surged over two-fold during YTD 2023
3PL players dominated demand during the Jan-Sept period, at 40% share, followed by engineering players, garnering 17%. At the same time, leasing by FMCG players experienced a two-fold rise as they expanded their presence in key markets such as Delhi NCR and Pune. The increase in leasing levels for the FMCG sector primarily pertains to the spurt in consumption levels over the last two quarters, which will likely continue in the previous quarter, led by the upcoming festive season.
During YTD 2023, large deals (>100,000 sq ft) accounted for about 72% of the demand. Amongst these significant deals, 3PL companies continued to account for the bulk of shares, followed by FMCG and Automobile players. Mumbai, followed by Chennai, dominated the chunk of large-sized deals across the top five cities.
“Despite global economic headwinds, India’s industrial & warehousing sector remains resilient, closely following the trendline of 2022. Leasing momentum is expected to continue in the year’s final quarter, led by 3PL, engineering and FMCG players and is likely to close in the range of 22-25 mn sq ft. The demand outlook from 3PL players remains positive in the medium term, and the sector will continue to dominate the warehousing activity in the next few quarters. Going ahead, key government policies and infrastructure developments, including Multimodal Logistics Parks, the Gati Shakti program, National Logistics Policy and clarity concerning the DESH Bill, will be instrumental in institutionalising the sector. At the same time, opportunities galore for investors & developers.” says Vimal Nadar, Senior Director and Head of Research Colliers India.
Led by consistent leasing activity and improved developer confidence, the Jan-Sept 2023 period saw a fresh supply of 16.7 mn sq ft, a 11% rise YoY. Amidst favourable demand-supply dynamics, vacancy levels during the year’s first half dropped by around 100 basis points (bps) to 9.4%. During the third quarter, new supply jumped 86% YoY. Chennai saw a significant influx of new supply, led by the NH-16 micro-market.
In the next few years, led by changing occupier preferences, there will be an increased focus on sustainable warehousing spaces, green-certified warehousing and integrated logistic parks by developers. Tech-driven investments in warehouse management systems, inventory tracking and fleet management systems will likely play a more prominent role in shaping the sector. At the same time, institutional players continue to gain more significant ground.
