Showcasing a substantial growth in H1 2023, the logistics market rentals in Asia-Pacific increased by 10.4% year-on-year, with key Indian cities Bengaluru and Delhi-NCR bagging positions in the top 10 APAC markets in terms of warehousing rent growth in H1 2023. On the other hand, the financial capital of India, is placed 11th, the report from Knight Frank titled Asia-Pacific Logistics Highlight H1 2023 revealed.
15 of 17 tracked cities recorded increasing rents in H1 2023. Data for Indian markets relates to the financial year.
Indian warehousing market
As per the report, demand in the three primary Indian Warehousing hubs remain robust, with Mumbai and Bengaluru witnessing substantial growth in leasing transactions as available spaces quickly become scarce over the past six months. In Delhi-NCR, there was a slight deceleration in activity, although this was from a previously elevated level. During the first half of 2023, rents continued their upward trajectory due to persistent demand and rising input costs.
While there has been a decline in e-commerce demand, manufacturing and third-party logistics (3PL) companies have stepped in to fill the void. Nevertheless, as consumer demand remains resilient, the e-commerce sector is anticipated to rebound once the excess capacities accumulated during the pandemic are absorbed.
Bengaluru which bagged the 6th place in the APAC logistics market saw the rents in the city grew 7.5% YoY to Rs 21.50 /sq ft/ month, compared to Rs 20/sq ft/ month last year. The city sees a healthy vacancy level at 15.8%, significantly lower than the 28.2% previously.
Delhi-NCR is positioned 8th in the APAC logistics market at Rs 20.20/ sq ft/ month, the city’s rents grew at 6.6% YoY compared to Rs 19/ sq ft/ month last year. The vacancy level has dropped to single digits in the latest period and currently stands at 9.7%.
Mumbai is in 11th position in the APAC logistics market in terms of annual rental growth. Mumbai is the most expensive warehousing market in the country. With a YoY growth of 4.2%, the city’s rents now stand at Rs 23.06 / sq ft/ month, compared to Rs 22/ sq ft/ month. The vacancy level has also dropped significantly to 10.3% from 14% in the previous year.
The report, which tracked prime logistics rent across 17 key cities across APAC, showed an average rise of 10.4% year-over-year in rental values, powered by the acceleration of rental growth in Manila. This growth defies the significant economic challenges that prevailed during the same period.
A resilient demand from e-commerce, third-party logistics (3PL) entities, and manufacturers fuelled the overall rise of the rentals, highlighted the report.
Most Southeast Asian cities tracked in the report recorded stable or improved rents, with Manila recording the highest rental growth of 49.3% year-on-year in Asia-Pacific, fuelled by sustained demand from e-commerce.
Preference for institutional-grade facilities in core areas and last-mile locations continued to propel leasing activity in the region, while the China+1 strategy also saw ongoing expansions by major manufacturers in Southeast Asia.
In Australasia, limited availability drove the broad – based rental growth as vacancy rates, especially in the Eastern Seaboard continued to sit at record-low levels.
Despite a peak in the development cycle that the region obtained in 2023, with each of the three major marketing expecting estimated 800,000 – 900,000 sq m of new supply, over 50% of the pipeline is already pre-committed and therefore the undersupply situation is expected to continue in the markets of Australia and New Zealand.