CBRE’s latest report highlights robust leasing growth in H1 2023 for Industrial & Logistics Sector

In its recent report, titled ‘CBRE Industrial & Logistics Figures H1 2023,’ CBRE South Asia Pvt. Ltd. highlights a remarkable 35% Year-on-Year surge in total leasing activity within the Industrial & Logistics (I&L) sector. The leasing figures reached an impressive 19.1 million square feet across 8 major cities during the January to June 2023 period. Notably, the report forecasts that this leasing momentum will continue during the Jul-Dec 2023 period, partially fueled by the festive season sales observed nationwide.

The leasing landscape during Jan-Jun 2023 saw Delhi-NCR, Mumbai, and Chennai emerge as the leading contributors, accounting for a substantial 60% share of the total leasing activity. With the exception of Bangalore, all cities exhibited an increase in I&L leasing, demonstrating an upward trend compared to the same period last year.

Furthermore, the report highlights a significant 78% YoY surge in supply, culminating in a total of 17.7 million square feet during Jan-Jun ’23. This surge is primarily attributed to the fulfillment of pent-up supply in select cities. Notably, Chennai, Kolkata, and Mumbai played a pivotal role in driving overall supply, collectively contributing to over 50% of the total project completions. Large developers, supported by institutional funds, played a crucial part, contributing approximately 39% to the supply during this timeframe. Delhi-NCR, followed by Chennai and Hyderabad, contributed to over two-thirds of the project completions.

During Jan-Jun ’23, the leasing arena was dominated by 3PL players, constituting a significant 43% of the share. These players facilitated space uptake as occupiers from e-commerce, retail, and manufacturing sectors outsourced their supply chain operations to 3PL firms. This strategy allowed them to fulfill storage needs, gain enhanced flexibility, reduce costs, and mitigate labor-related challenges.

In terms of sectoral distribution, both e-commerce and retail firms accounted for approximately 9% of the leasing activity each. Other sectors, including auto & ancillary (7%), FMCG (6%), and electronics and electricals (5%), also contributed to the leasing trends.

The breakdown of space take-up revealed that small-sized transactions (<50,000 sq. ft) held a dominant share of about 44% during Jan-Jun ’23. Medium-sized transactions (50,000 – 100,000 sq. ft) and large-sized deals (more than 100,000 sq. ft) accounted for approximately 24% and 32% respectively. Large-sized deal closures were notably led by Delhi-NCR, Mumbai, and Chennai, collectively contributing to about 65% of such deals. From a sectoral perspective, 3PL, followed by engineering & manufacturing, and retail firms, played a significant role, culminating in a cumulative share of around 70%.

In key micro markets across cities, rental values witnessed a half-yearly increase, excluding Mumbai and Kolkata. Mumbai’s rental rates remained stable during H1 ’23, while Kolkata experienced a marginal 2-3% decline due to an oversupply in the market.

“The second half of the year foresees a consistent influx of leasing activities, paving the way for an estimated 32-36 million sq. ft. uptake of Industrial and Logistics (I&L) space in 2023. This growth trajectory will be predominantly propelled by the Third-Party Logistics (3PL) sector as they continue to implement a ‘multipolar’ supply chain strategy. The space take-up by engineering & manufacturing firms is also expected to remain strong led by the persistent endeavours of the government to enrich the investment landscape, attracting both global and domestic manufacturers to establish operations within India. In addition, we anticipate increased interest from FMCG, retail, and electronics & electrical firms, attributed to the surging consumer demand. Furthermore, a slight improvement in e-commerce leasing sentiments is on the horizon, fuelled by the forthcoming festive season sales nationwide.”

Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE

Driven by the completion of pent-up projects in the first half of 2023, the supply addition is projected to reach approximately 26-30 million sq. ft. by year-end, a significant increase from the 21 million sq. ft. completed in 2022. Furthermore, we anticipate that larger developers supported by institutional funds will continue to play a more prominent role in project completions, with their share expected to touch about 40% in 2023 compared to 33% in 2022. Additionally, in response to the growing demand in tier-II cities, developers are likely to explore investment opportunities in these emerging logistics nodes by acquiring land banks in proximity to new infrastructure initiatives.”

Ram Chandnani, Managing Director, Advisory & Transactions Services, CBRE India

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