Industrial & warehousing demand gains momentum with about 20 mn sq ft leased in 9 months

The industrial and warehousing sector in India has experienced significant growth, with approximately 20 million square feet of space lease in the past 9 months of 2024, reflecting a 17% year-on-year increase across the top five cities.

Colliers reported that the quarterly average space uptake has risen from 5.7 million square feet in 2021 to 6.7 million square feet in 2024, demonstrating consistent and robust growth in demand for industrial and warehousing space.

In the first three quarters of the year, Delhi NCR and Chennai collectively held a 53% share in overall leasing activity. Third Party Logistics (3PL) companies remained the dominant force, contributing to 35% of the total leasing demand, while the Engineering and FMCG sectors also showed significant demand. At a micro market level, Bhiwandi in Mumbai saw 3.7 million sq ft of leasing activity in 2024, followed by Oragadam in Chennai and Chakan-Talegaon in Pune recorded over 2.0 million sq ft of demand, driving warehousing demand in their respective cities.

“On a quarterly basis, Q3 2024 saw about 7.3 mn sq ft of industrial & warehousing demand across the top five cities, an18% rise YoY. With 2.3 million sq ft of leasing and about one-third share, Delhi NCR continued to drive quarterly demand. The demand in the region was led by large uptake of industrial and warehousing space in Bhaproda and Kulana micro markets.Across the top five cities, 3PL firms accounted for the bulk ofquarterly demand led by Mumbai and Chennai. Notably,engineering firms accounted for about 26% share in overall demand during the third quarter, with large take up of space in Chennai and Delhi NCR. Moreover, with increased demand for quality Grade A spaces replete with sustainable and technologically advanced features, leasing momentum by such firms is likely to continue over the next few years” says Vijay Ganesh, Managing Director, Industrial & Logistics Services, Colliers India.

The report highlights that 3PL (third-party logistics) providers maintained a dominant position in demand from January to September 2024, holding approximately 35% share of overall leasing. Notably, players from the Engineering and FMCG (Fast-Moving Consumer Goods) segments significantly contributed to space uptake, collectively representing 32% of industrial and warehousing demand in 2024. Furthermore, there are optimistic expectations for continued strong industrial and warehousing space uptake by these segments.

“Taking cognizance of healthy demand across major cities and supportive government policies, 2024 can potentially close with record leasing activity to the tune of 25-30 million sq ft. Improving logistics efficiencies, capacity augmentation and enhanced credibility of India as a global manufacturing hub will keep the growth momentum steady in the industrial and warehousing sector.” says Vimal Nadar, Senior Director & Head of Research, Colliers India.

During the first nine months of 2024, large deals of over 200,000 sq ft accounted for about 40% of the overall demand. Although a vast majority of these larger deals came from 3PL players, Engineering and FMCG segments also saw considerable large-sized deals. At the city level, industrial and warehousing space uptake in Delhi NCR was also driven by large sized deals, a marked deviation from 2023, wherein leasing activity was dominated by small sized deals. Almost 50% of the deals in the first nine months of 2024 were large sized in Delhi NCR.

The report mentioned healthy leasing activity and improved developer confidence. During the period from January to September 2024, significant increase in leasing activity and improved developer confidence in the real estate market led to healthy supply of industrial and warehousing space. New supply increased by 21.6 million square feet, marking a 29% year-on-year rise. The Delhi NCR region alone contributed to 35% of the total completions with 7.6 million square feet of new developments. In Q3 2024, the top five cities in the country saw a healthy new supply of approximately 7.2 million square feet. Despite these developments, overall vacancy levels by the end of Q3 2024 remained stable at around 12-13% due to favorable demand-supply dynamics.