Industrial and warehousing demand across the top 5 cities saw the highest leasing compared to the previous eight quarters, with the growth in private consumption in the domestic economy. The segment witnessed 11% YoY growth with a 7.2 mn sq ft lease in the first half of 2023.
The demand was led by 3PL operators who continued to expand across large markets, forming 41% of total leasing during the quarter. This was followed by retail and FMCG sectors that saw a three-fold rise YoY, as they expanded their footprints in larger markets such as Delhi-NCR and Mumbai, it mentioned.
Delhi-NCR led the demand during the first quarter accounting for a 29% share in total leasing, followed by Mumbai at 25%. Mumbai saw a 37% YoY rise in leasing, led by 3PL operators who continued their expansion spree in the city despite weaker economic & business sentiment, the report said.
“3PL operators are targeting larger dense markets with good-quality infrastructure for expansion to ensure quick delivery of online orders. It contributed to more than 2/3rd of the total leasing in Mumbai, led by select large deals. The average deal size by 3PL operators in the city was more than 2 lakh sq feet, 69% higher than the pan India average. 3PL operators will continue to eye larger markets as they look to augment their distribution network.” says Vimal Nadar, Senior Director and Head of Research Colliers India.
During Q1 2023, large deals (>100,000 sq ft) accounted for about 80% of the demand. Amongst more important deals, 3PL companies accounted for the highest share, followed by FMCG & engineering companies. While Delhi NCR saw the most increased leasing overall, Mumbai accounted for the highest percentage in large-sized deals, followed by Pune. Also, more than 80% of deals in FMCG and Electronics were large-sized deals.
While industrial and warehousing demand remained sturdy during Q1 2023, new supply across the top 5 cities was limited. Supply across the top 5 cities declined 8% YoY, at 5.8 mn sq ft, as developers remained watchful on the evolving demand scenario. Higher raw material prices and increased logistics costs also impacted new project completions across major markets. Over the next few quarters, developers will continue to remain cautious and are likely to bring in supply to meet market demand, keeping market fundamentals intact.
“Over the last 7-8 quarters, demand in Pune has largely outpaced supply, with vacancy dropping significantly to 6.3% during Q1 2023. Demand from the automobile & engineering sectors remains unabated & continues to account for at least 50% on average. Riding high on this strong demand, multiple large-scale warehousing parks have been planned in the Chakan-Talegaon region. This is expected to provide occupiers with quality warehousing space options in next 2-3 years, thus aiding growth. The influx of superior quality warehousing spaces coupled with robust demand from occupiers will push rentals upward & keep the overall market activity.” says Animesh Tripathi, Managing Director, Pune and Mid-India Industrial and logistics services, Colliers.
Owing to limited available supply and robust demand, vacancy levels across the top 5 cities dropped by 170 basis points YoY during Q1 2023 to 8.1%. Most markets except Delhi-NCR saw single-digit vacancy levels, backed by steady demand from 3PL, FMCG & 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% and 6%, respectively.
