Industrial & warehousing space leasing expected to grow by 83% in 2021: Savills India

Author Name: Karvi Rana
Post Date: 2021-01-11
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According to global property consultancy firm Savills India, the industrial and warehousing space absorption is expected to grow by 83% to 47.7 mn sq. ft. in 2021, driven by a robust growth in e-commerce and manufacturing sectors as well as rising demand in emerging tier I and tier II cities.

The firm says, that the 3PL and e-commerce sectors continued to drive warehousing demand accounting for 60 % of the total absorption in 2020, followed by manufacturing sector at 24%.

 The growing numbers of firms in these sectors and the huge Indian consumption market have whipped up the investment prospects of India’s warehouse sector.  In 2020, the industrial and warehousing market witnessed investments in excess of 1 billion USD.

The consultancy, while marking the major cities in India as per the industrial and warehousing space absorption, tagged NCR with the highest absorption in 2020 at 25% followed by Pune at 15%. Mumbai and Chennai saw absorption at 13% each while Kolkata stood at 12.0% while the Tier II cities such as Ludhiana, Lucknow, Coimbatore, Jaipur, Guwahati, Bhubaneswar, Nagpur and Patna witnessed around 3 mn sq. ft. in 2020.

These cities are likely to gain momentum in 2021 with e-commerce and 3PL firms capitalising on consumption-driven growth and pushing the demand for warehousing space, the firm said.

On the supply side, Savills India expects a 113% increase in supply to 47.9 mn sq. ft. in 2021. The firm said that despite construction activities getting affected due to the lockdown, the top-8 cities of India witnessed a fresh supply of 22.4 mn sq. ft. last year. 

NCR accounted for 22% of the total supply witnessed in 2020 followed by Chennai (20%), and Bangalore (12%).  The overall industrial and warehousing space stock is expected to increase by 21% at 278 mn sq. ft. in 2021 as compared to 230 mn sq. ft. last year.

“Growing demand for cold chain, pharmaceutical warehouses as well as growth in e-commerce and organised retail are likely to drive warehousing demand in 2021. In addition, strong macro-economic fundamentals and government’s policy support in implementation will continue to fuel growth for the entire sub asset class of industrial and logistics.”

~Srinivas N, Managing Director, Industrial and Logistics, Savills India

The warehousing vacancies have also decreased by 170 basis points from 10.2% in 2019 to 8.5% in 2020 and rental values remained stable in 2020 across the major cities.

Mr Srinivas N adds, “India is emerging as an alternate manufacturing investment destination. Foreign manufacturing companies are planning to shift their manufacturing base to India. This would lead to an increased demand for both ready high spec fitted out and custom-built industrial spaces across India particularly from growing sectors such as FMCG, energy, automobile, electronics, pharmaceutical, medical devices among others.”

“As we move ahead, improved specifications and strong compliance will set the pace and lead to the growth of the industrial and allied sectors. Diverse investment opportunities and growing interest in developing infrastructure around Integrated Industrial Townships, highways, ports, inland waterways, Inland Container Depots (ICD’S), and Free Trade & Warehousing Zones (FTWZs) will boost the sector. Automation and manpower will steer disruptions in the years ahead”, he added.

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