Industrial and logistics sector grew 8% YoY in 2022: CBRE

Despite global headwinds, a slowdown in e-commerce demand and dissipation of the post-pandemic need to hold additional inventories, the leasing activity in industrial and logistics sector grew 8% year-on-year (YoY) to touch 31.6 mn sq ft in 2022 according to a report by real estate consultant CBRE.

After 2019 peak of 32mn sq. ft., this is the second-highest leasing activity recorded in the sector with total supply in 2022 touching 20.9 mn sq. ft.

Delhi-NCR led the absorption with 7.3 mn sq. ft., followed by Mumbai and Bangalore with 6.1 mn sq. ft and 5.2 mn sq. ft in 2022, respectively. The three cities accounted for almost 60% of the leasing activity during the year. All cities recorded stable or increased annual space take-up except Bangalore and Pune.

Leading the absorption, 3PL players accounted for about half of the annual space take-up, driven by heightened demand from interlinked stakeholders across the supply chain (wholesalers, retailers, & e-commerce players) for the need to shore up distribution capabilities.

3PL players have cumulatively leased more than 60 million sq. ft across India, over the last five years.  A majority of this space take-up was led by domestic occupiers.

Engineering and manufacturing firms in 2022 held a share of 16% in the total leasing, which was up by 6%  from previous year. For local engineering and industrial players, government policy enablers like the Production Linked Incentive (PLI) programme worked as a growth stimulant.

Space take-up was dominated by small-sized transactions (<50,000 sq. ft.), with a share of about 40% in 2022. The share of medium (50,000 – 100,000 sq. ft.) and large-sized (more than 100,000 sq. ft.) transactions were about 29% and 31%, respectively during 2022.

Mumbai, followed by Delhi-NCR dominated large-sized deal closures in 2022, together accounting for about 44% of large-sized deals. In 2022, 3PL, followed by engineering & manufacturing firms, drove large-sized deal closures with a total share of about 65%.

The demand for investment grade assets, was led by improvement in leasing sentiment and a rise in input costs, quoted rental values increased on an annual basis in most micro-markets across cities in 2022.

During the year, only Chennai and Ahmedabad witnessed stable rents. About 20-30% YoY growth was witnessed in Pimpri – Chinchwad and Chakan – Talegaon, whereas Hyderabad witnessed 23-25% YoY growth in Northern Corridor. Bangalore witnessed rental growth of 18-20% YoY in the Western Corridor.

“The intent to strengthen supply chain among global and domestic companies drove the leasing activity in 2022. Further, the leasing activity in 2023 is expected to remain range-bound, driven by sustained demand from 3PL, engineering & manufacturing and retail firms. On the supply front, we foresee project completions to exceed the 2022 levels and be in line with space take-up during 2023,”

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

“We anticipate 3PL firms to drive leasing activity as companies look to shore up their distribution capabilities. Moreover, rental growth is likely to continue in micro-markets driven by high-quality project completions and the supply-demand imbalance,”

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

The I&L sector on a half-yearly basis witnessed a 46% jump in absorption, which touched 18.8 million sq. ft. in July-December 2022 period compared to 12.9 million sq. ft. in January-June 2022, led by sustained leasing by 3PL players (51%), engineering & manufacturing firms (16%) and retailers (8%).

Delhi-NCR, Mumbai and Bangalore led space take-up in July-December 2022 with a combined share of about 61% in the total absorption.

During July-December 2022 period, supply addition improved 11% on a half-yearly basis to ~11 mn sq. ft. These development completions were led by Delhi-NCR, Chennai, Bangalore and Mumbai, all of which together accounted for about 73% of the total supply.

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