India’s Logistics and Industrial leasing surpasses 50 Million Sq Ft milestone in two years: Report

A recent report by Cushman & Wakefield reveals that logistics and industrial leasing in India have surpassed the 50 million sq ft milestone in the last two years. This growth is attributed to robust economic and industry fundamentals, particularly in flourishing sectors like manufacturing and third-party logistics (3PL). Government initiatives such as the Production Linked Incentive (PLI) scheme have also played a pivotal role.

The industrial leasing sector experienced a remarkable 23% year-on-year growth in 2023, totaling almost 16 million sq ft. Pune and Chennai were major contributors, accounting for 8.37 million sq ft (53% of pan India leasing volume) and 3.81 million sq ft (24% of pan India leasing volume), respectively. This surge indicates an upward trajectory in manufacturing, supported by healthy capacity utilization, effective business plans by domestic firms, and the encouragement of investments through government incentives.

Chennai’s logistics and industrial sector had an outstanding year in 2023, marked by substantial leasing activities in warehouses and industrial sheds. The city witnessed a 2.1x growth, reaching 10.78 million sq ft in overall leasing, a significant jump from 5.16 million sq ft in 2022. The Oragadam submarket in Chennai experienced exceptional demand, with gross leasing reaching 2.14 million sq ft, a remarkable 5x increase compared to 2022. The 3PL/logistics sector was the driving force, contributing 64% to the yearly gross leasing activity.

For the entire year of 2023, manufacturing tenants leased 3.8 million sq ft in Chennai, with Oragadam and Sriperumbudur being the prominent locations. The electronics and automobile sectors took the lead with shares of 28% and 24%, respectively.

However, warehousing leasing experienced a slight dip of 7% in 2023, totaling 37.7 million sq ft compared to 40.4 million sq ft in 2022. The decline in e-commerce firm leasing was offset by strong demand from 3PL operators, manufacturing, and retail firms. This trend suggests a potential shift as e-commerce companies outsource logistics and warehousing operations to 3PL specialists.

Mumbai emerged as the top warehousing hub in 2023, capturing 27% of the market share, closely followed by Chennai with 19%. Delhi and Pune held 18% and 12% shares, respectively.

Delhi-NCR experienced a noticeable decline in warehousing activity in the second half of 2023, largely due to fewer major space transactions. Gurgaon dominated warehouse leasing during this period with a 52% share, followed by Ghaziabad with 22%, and Sonipat with 13%. Despite a 57% year-on-year decline in the second half of 2023, Gurgaon, Ghaziabad, and Sonipat collectively held an 81% share in annual warehouse leasing for 2023.

Industrial leasing activity in NCR in the second half of 2023 decreased by 58% compared to an exceptional first half. However, the annual industrial leasing in NCR was only 8% lower than 2022, maintaining a 40% higher volume than the average over the past five years. The demand in the industrial sector for the second half of 2023 was concentrated in Gurgaon, with Manesar holding a substantial 42% share.

These trends underscore the resilience and adaptability of the Indian logistics and industrial leasing market, driven by various factors, including economic fundamentals, sectoral growth, and strategic government initiatives.

“Logistics & Industrial segment in India has defied global uncertainties to achieve a stable growth for two years in a row. This is fuelled by a confluence of factors, including strong economic and industry fundamentals, rapidly growing sectors like manufacturing and 3PL, and supportive government policies like the PLI scheme. We expect this momentum to continue in 2024, solidifying L&I as a key driver of Indian real estate growth,” said Abhishek Bhutani, Managing Director, Logistics & Industrials, Cushman & Wakefield.

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