The latest report by Colliers has revealed that the Industrial warehousing demand across five cities has risen by 11% year on year to 7.2 million square feet. This is on the back of growing demand from third-party logistics operators who continued to expand across large markets, forming 41 percent of total leasing during the quarter. Next in line, was the FCG sector which contributed to the growing demand, forming 12 percent of the total leasing.
Retail and FMCG sectors demand saw a three-fold rise y-o-y, as they expanded their footprints in larger markets such as Delhi-NCR and Mumbai. This pick-up in the demand for industrial warehousing space is in sync with the growth in private consumption in the domestic economy.
The quarter also saw the highest leasing in the country by the warehousing segment compared to the previous eight quarters.
The demand during the first quarter was led by Delhi-NCR which accounted for a 29 percent share in total leasing, followed by Mumbai at 25 percent. Led by logistics companies, the financial capital saw a 37 percent annual rise in leasing.
“3PL operators are targeting larger dense markets with good-quality infrastructure for expansion to ensure quick delivery of online orders,”Vimal Nadar, Senior Director, and Head of Research, Colliers India.
In Mumbai, the average deal size by 3PL operators was 69% higher than the pan India average, with operators leasing more than 2 lakh square feet of area.
As per Nadar, 3PL operators looking to augment their distribution network will continue to eye larger markets.
As per the report, the new warehousing stock across the top five cities was limited. A decline of 8% y-o-y to 5.8 msf in Supply was observed as developers remained watchful on the evolving demand scenario. The increase in raw material prices and logistics costs also impacted new project completions across major markets.
The report observes that developers in the next few quarters will continue to remain cautious. They are likely to bring in supply to meet market demand, keeping market fundamentals intact, Colliers said.
Vacancy levels across the top 5 cities dropped by 170 basis points y-o-y during Q1 2023 to 8.1 percent owing to limited available supply and robust demand. Apart from Delhi-NCR, the majority of the markets witnessed a single-digit vacancy level, backed by steady demand from 3PL, FMCG, and engineering companies. With demand being upbeat amidst limited supply, rentals across top micro-markets saw an annual rise. Chakan in Pune and Bhiwandi in Mumbai were some of the key micro markets which saw an uptick in rentals by 14 percent and 6 percent, respectively.