Industrial and Warehousing Sector Absorption Soars in Q1 2024: Report

According to a recent report by Savills India, the industrial and logistics sector in India saw a substantial increase in absorption during the first quarter of 2024, reaching 13.5 million square feet compared to 11.0 million square feet in the same period last year, marking a significant 22.7% year-on-year growth.

Tier I cities accounted for the majority of this absorption, comprising 78%, while tier II and III cities made up the remaining 22%. 

The surge in demand was fueled by sustained interest from the third-party logistics (3PL) and manufacturing sectors, as well as a notable increase in demand from the fast-moving consumer goods (FMCG) sector.

Manufacturing warehouses played a pivotal role in driving overall absorption, alongside sustained demand from the 3PL and FMCG sectors.

On the supply side, the sector saw an addition of 12.9 million square feet of fresh supply during Q1 2024, indicating a 4% growth compared to the same period last year. Tier I cities contributed 76% of this supply, with Delhi-NCR leading the pack, followed closely by Bengaluru and Kolkata.

In terms of absorption, Delhi-NCR maintained its lead with 21%, followed by Pune and Bengaluru at 12% each. Pune saw a notable increase in its contribution to absorption from 7% in Q1 2023 to 12% in Q1 2024, while Mumbai’s contribution decreased from 14% to 7% during the same period.

The report also highlighted the growing importance of Grade A space, accounting for 45% of the supply and 41% of the absorption in Q1 2024. Changing occupier preferences towards environmental, social, and governance (ESG) standards are expected to further drive demand for Grade A warehousing and factory space.

3PL remained the largest constituent of demand, representing 36% of the overall absorption in Q1 2024. Tier II and III cities saw a notable increase in 3PL absorption, reflecting the growing trend of supply chain outsourcing and the need for more warehousing spaces.

“The growing trend of supply chain outsourcing has resulted in increased expansion of 3PL players in tier II and III cities, leading to higher demand for warehousing space. Manufacturing sector continues to account for over 25% of the total absorption, with improved manufacturing activities likely to drive increased uptake of manufacturing warehouses as well,” said Srinivas N, Managing Director, Industrial and Logistics, Savills India.

Looking ahead, the e-commerce sector is expected to experience a surge in activity, particularly in urban distribution and expansion into tier II and III cities, which are emerging as prominent hubs for sourcing, consumption, and distribution, he said. 

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