Activity in Grade A industrial and warehousing facilities remains resilient, with a gross absorption during H1 2022 in the top 5 cities at 10.8 million sq feet, a 7% increase YoY, observes Colliers.
The Canada-headquartered real-estate company states that in H1 2022, Delhi-NCR accounted for the highest Grade A industrial and warehousing activity standing at a 28% share, followed by Pune with a 24% share in demand. However, on the supply side, vacancy declined by 24% YoY to 11.8 million sq feet in H1 2022.
About 55% of the gross absorption was led by third-party logistics players, followed by the Engineering and Automobile sectors with a share of 12% each.
The first half of this year has seen several large deals with an average deal size up 27% YoY. Grade A supply in preferred micro markets across key markets in India continues to remain muted owing to the construction slowdown on account of the rise in construction costs. This has led to short-term rent increases. Third-Party Logistics players continue to dominate demand in the first half of this year and the trend is expected to continue in the next few quarters as well. We are also witnessing more Tier II city inquiries as key players are strengthening their last-mile delivery supply chain to be proximate to customers,”Shyam Arumugam, Managing Director, Industrial and Logistics Services, Colliers India.
During the first half of 2022, the overall, grade A supply took a dip by 24% YoY across the top five cities to about 11.8 million sq feet. However, regardless of the low supply and steady leasing, the vacancy level rose during the quarter. Grade A vacancy levels rose to 11.1% at the end of Q2 2022, from 9.8% in Q1 2022, on the back of strong leasing activity in Delhi-NCR, Chennai, and Pune. The rise in vacancy was led by Delhi-NCR wherein vacancy levels saw an increase during the quarter.
Delhi-NCR dominated leasing activity in the first half of 2022 with a share of 28%, which was led by large deals that accounted for about 77% of the total leasing. Deals by third-party logistics players led most of the activity through large deals. The majority of the activity was in the Tauru Road location. Pune accounted for 24% of the leasing in H1 2022. The automobile sector continued to lead the demand with a notable share of 40% in total leasing of the city, followed by the third-party logistics sector at 27% share.
Deals above 100,000 sq feet accounted for 75% of the total leasing. This was led by larger deals by third-party logistics players and fast-moving consumer goods (FMCG) companies.
“Occupiers, especially third-party logistics players and e-commerce players are increasingly taking up larger integrated warehousing space. On the supply side, we may see some limitations over the next few quarters as developers face supply chain constraints and rising input cost materials,” saysVimal Nadar, Senior Director, and Head of Research Colliers India.