Industrial & Warehousing records over 46 mn sq. ft. space of absorption in 2022: Savills India

In 2022, the industrial and warehousing space witnessed absorption of more than 46 mn sq. ft which includes over 36 mn sq. ft from tier I cities and over 10 mn sq. ft from tier II & III cities. India has had a fresh supply of 47 mn sq. ft of Industrial & Warehousing space in 2022, of which 34 mn sq. ft was from tier I cities and close to 13 mn sq. ft from tier II & III cities, revealed the latest data from International real estate advisory firm, Savills India.

Supply & absorption in tier I cities (2022 vs 2021)

  2022 2021 Y-o-Y change
Supply (Mn sq. ft) 34.1 36.0 -5.3%
Absorption (Mn sq. ft) 36.2 35.1 +3.1%
Stock (Mn sq. ft) 300 266 12.8%
Vacancy (%) 9.0% 9.4% -40 bps

Supply & absorption in tier I cities (2022 vs 2021)

  2022 2021 Y-o-Y change
Supply (Mn sq. ft) 34.1 36.0 -5.3%
Absorption (Mn sq. ft) 36.2 35.1 +3.1%
Stock (Mn sq. ft) 300 266 12.8%
Vacancy (%) 9.0% 9.4% -40 bps

*Tier II & III cities include Coimbatore, Guwahati, Indore, Nagpur, Lucknow, Jaipur, Rajpura, Bhubaneswar, Kochi/Ernakulam, Patna and Hosur, Madurai, Varanasi, Hubli, Ludhiana

Leading the pack among the major cities, Delhi NCR had the highest absorption in 2022 at 16% followed by Mumbai at 14%, Pune at 13% and Bengaluru at 12%. Whereas tier II & tier III cities accounted for 22%. 

Driving the warehousing demand, 3PL and e-commerce sectors together accounted for 52% of the total absorption witnessed in 2022, followed by manufacturing sector at 16% and retail sector at 13%.  Grade A space accounted 42% of total absorption and 48% of total supply witnessed in 2022. 

In 2022, the tier II & III cities witnessed 10 mn sq. ft of absorption. With e-commerce, retail and 3PL firms capitalizing on consumption-driven growth and pushing the demand for warehousing space, these cities are poised to gain further momentum in 2023 and 2024.

The overall industrial and warehousing space stock in tier I cities stood at 300 mn sq. ft at end of 2022 and is expected to reach 342 mn sq. ft.in 2023. Meanwhile, Vacancy levels in Tier I cities have decreased from 9.4% in 2021 to 9.0% in 2022 and the yields remain stable across the cities in 2022.

Land Transactions – Manufacturing & Warehousing

The market witnessed transaction of 3,800 plus acres of manufacturing and warehousing land across tier I, II & III cities of the country of which 64% was private land and 36% was government land.

Investments-Manufacturing & Warehousing

Despite the impact on the financials of the asset class in the 2nd and beginning of 3rd quarters of the year caused due to rising construction costs, geopolitical issues such as the Russia -Ukraine war and rise in interest rates, the industrial & logistics sector has continued to garner investor interest.

However, as the input costs stabilized and the developers were able to optimize and adjust to the changing factors, the sector quickly bounced back to normalcy.

 In terms of investment, the warehousing sector in 2022 managed to raise private equity to the tune of $1.5 billion. In 2023, the market will most likely witness increased interest from investors in this asset class owing to inherent domestic demand and expansion of distribution networks in tier II & tier III cities.

Emerging amongst the high growth sectors in India, Manufacturing has seen a large number of tractions after the roll out of PLI scheme with major multinational players announcing their investment plans in the nation. An increased supply of manufacturing space with improved specifications to meet the requirements of manufacturing occupiers can be expected.

“The rapidly expanding and highly competitive e-commerce market has fuelled the growth of industrial, logistics and warehousing since the last two years. The industrial & logistics sector is likely to see absorption of 40+ mn sq. ft in 2023. This demand for space could stem from emerging Tier II & III Cities, growing demand for urban warehousing and a major transformation in the Indian manufacturing sector backed by Performance Linked Incentives (PLIs) and efficient multi model connectivity plan for local and global distribution. We expect around 50+ mn sq. ft of new supply to be infused in the market during the same period.”. Srinivas N, Managing Director, Industrial and Logistics, Savills India.

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