In H1 2023, the industrial and warehousing sector recorded a total absorption of 22.4 million sq. ft., indicating a 7% increase compared to the 20.9 million sq. ft. absorbed in the first half of 2022. While Tier I cities accounted for 75% of the total absorption in the first half of 2023, while tier II and III contributed remaining 25%, said findings from a latest research done by Savills India, an International real estate advisory firm.
As per the findings, the industrial and warehousing sector during the same period also witnessed a new supply of 27.4 million sq. ft., reflecting a 36% growth from the 20.2 million sq. ft. recorded in the first half of 2022.
In recent years, the growing emphasis on quality and compliance, as well as changing occupier preferences to meet ESG (Environmental, Social, and Governance) standards has led to a substantial surge in the demand for Grade A warehousing and ready fitted-out factory space.
The total absorption of Grade A space in the country has grown significantly from 36% in the first half of 2022 to 53% in the first half of 2023.
A significant growth is also being observed in Tier II and III cities as prominent hubs for sourcing and consumption, easing distribution. This has resulted in a notable 22% year-on-year growth in absorption in these cities, increasing from 4.1 million sq. ft. in the first half of 2022 to 5.0 million sq. ft. in the first half of 2023. Accounting for the highest absorption among the Tier I cities was Mumbai which accounted for 18% of the total absorption in the country, followed by Delhi-NCR at 14% and Pune at 10%. Bengaluru and Chennai recorded an absorption of 9% each.
“Driven by inherent domestic demand and the expansion of distribution networks in tier II and tier III cities, the industrial and logistics sector is on a growth path. The 3PL, manufacturing, urban warehousing and retail sectors are likely to contribute significantly to the absorption. We expect absorption in excess of 40 million sq. ft in 2023”.
Srinivas N, Managing Director, Industrial and Logistics, Savills India.
Playing a major role in driving up demand is India’s 3PL sector, which accounted for approximately 40% to 50% of the total demand, not far behind was the manufacturing sector which has also gained momentum due to increased activity backed by various incentive schemes. As per the report, In H1 2023, the 3PL sector continued to drive warehousing demand, accounting for 44% of the total absorption, a notable increase from37% in H1 2022. The manufacturing sector followed at 22%, while the retail sector accounted for 13%, and the FMCG/FMCD sector accounted for 6%.
The planned Multi Modal Logistics Parks (MMLPs) along with government and private industrial parks in India have been supporting and promoting growth. The government has identified over 4.5 lakh hectares of land across several states which could potentially be offered for establishing industrial & logistics hubs. In H1 2023, the market witnessed transactions of close to 1,500 acres of manufacturing and warehousing land in the country of which 72% was for manufacturing purpose, 22% was for warehousing and 5% for mixed-use (both manufacturing & warehousing) development. Additionally, more than 50% of the transactions were dedicated to captive usage.
