Industrial and Warehousing Sector Booms with Record Leasing Activity in Q1 2024

The industrial and warehousing sector in India experienced a notable surge in leasing activity during the first quarter of 2024, marking the highest supply increment in the last two years. According to data from Colliers India, new supply reached close to 7 million square feet, with approximately one-third of Grade A developments concentrated in the Delhi NCR region.

Key industrial and warehousing hubs across the country witnessed buoyant leasing activity, totaling 7 million square feet. Mumbai and Chennai emerged as frontrunners in demand, accounting for about 55% of the total share. Of particular interest was Chennai, which saw robust leasing activity, nearly doubling its uptake compared to the same period last year.

Bhiwandi in Mumbai emerged as the most active market for Q1 2024, with 1.7 million square feet of Grade A demand, followed closely by Oragadam in Chennai, surpassing leasing activity in Chakan Talegoan in Pune.

Third-party logistics players (3PL) continued to dominate industrial and warehousing space occupancy, contributing over 40% to the total demand. Chennai stood out with about 43% of the overall 3PL activity in the top five cities. Retail players also made a significant impact, accounting for 16% of the demand nationwide, followed by engineering and automobile sectors with 12% each.

Vijay Ganesh, Managing Director of Industrial & Logistics Services at Colliers India, highlighted the evolving consumption patterns, noting that the combined share of retail, engineering, and automobile sectors rose from 26% in Q1 2023 to 40% in Q1 2024, indicating shifting dynamics and emerging opportunities in the sector.

The e-commerce segment witnessed a remarkable surge, with leasing activity soaring 2.3 times compared to the same period last year. This growth trajectory is expected to continue as the focus on digital infrastructure and changing consumer behaviors drive demand for warehouse spaces. Additionally, the rise of Quick Commerce (Q-commerce) players is anticipated to further stimulate demand for larger hub-warehouses.

Retail players also demonstrated heightened interest in warehousing space, with demand more than doubling from a year ago. This expansionary activity is fueled by strong retail performance across cities, particularly in large department stores, signaling a favorable consumption pattern and promising demand for warehousing space in the coming quarters.

Large-sized deals, defined as those exceeding 200,000 square feet, accounted for over 50% of the industrial and warehousing space demand in Q1 2024. While 3PL companies continued to dominate this segment, the rise in large deals was propelled by retail and e-commerce players, particularly in Chennai and Mumbai.

Vimal Nadar, Senior Director & Head of Research at Colliers India, expressed optimism regarding the sector’s performance in 2024, citing an upbeat start to the year and improved developer confidence. With a Grade A supply pipeline of approximately 23-25 million square feet for the year, Nadar expects supply to closely align with demand trends across the top five cities.

Despite rising supply and healthy demand, vacancy levels saw a slight increase to 11% by the end of the first quarter, attributed to churn and exits in the industrial and warehousing space. However, amidst this backdrop, rental rates remained range-bound, experiencing an 8% rise in select micro markets of Chennai and Pune.

As the industrial and warehousing sector continues to evolve and adapt to changing market dynamics, stakeholders remain optimistic about its growth trajectory in the coming quarters, driven by sustained demand diversification and robust leasing activity.

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