The leasing of the Industrial and Logistics (I&L) sector is likely to touch a five-year high at 36–38 million square feet (msf) in 2023 across the top eight cities in India, real estate consultancy CBRE said in its India Market Monitor Q3 2023 on Wednesday.
In the July-September quarter, Chennai recorded the highest absorption with 2.1 msf, followed by Bangalore and Mumbai, recording 1.7 msf and 1.3 msf, respectively. The combined leasing share of these three cities accounted for approximately 62 per cent.
In terms of the sector, third-party logistics (3PL) players accounted for the lion’s share of 50 per cent of the total leasing activity. It was followed by 13 per cent of engineering and manufacturing and 8 per cent of electronics and electrical companies.
As per the regional trends, domestic corporations took the lead in leasing activities with a 59 per cent share, followed by Europe, West Asia and Africa region corporations at 25 per cent and Asia-Pacific corporations at 12 per cent. The I&L sector also witnessed a 92 per cent year-on-year increase and 12 per cent quarter-on-quarter (QoQ) growth in warehouse completions in the quarter.
The leasing in the I&L sector grew by 13 per cent year-on-year (YoY) in the January-September period. The total absorption across the top eight Indian cities stood at 27.3 msf compared to 24.2 msf in 2022. Mumbai, Chennai, and Delhi-NCR collectively accounted for a share of 56 per cent in the leasing activity during the period.
In the first nine months of the year, 3PL players dominated leasing with a 45 per cent market share, followed by E&M companies (15 per cent), and auto and ancillary companies (7 per cent).
“The accelerated embrace of ‘multipolar’ supply chain strategies, complemented by the government’s pro-investment initiatives, continues to propel the 3PL and E&M sectors, being at the forefront of I&L absorption,” said Ram Chandnani, managing director, Advisory & Transactions Services, CBRE India.
“We also anticipate a surge of interest from FMCG, retail, and electronics & electrical sectors, driven by consumer demand.”
Anshuman Magazine, Chairman and chief executive officer (CEO) – India, South-East Asia, Middle East & Africa, CBRE, added, “Moreover, the active participation of larger developers backed by institutional funds, contributing around 40 per cent to the completed projects, underscores the sector’s growth potential. In select micro-markets, the prospect of rising rents is bolstered by the premium commanded by new, investment-grade, technologically advanced, and strategically situated assets.”
CBRE data added that supply addition, too, is expected to outperform, touching 35 – 37 msf by December, driven by the completion of pent-up projects. In the first nine months of 2023, supply addition was registered at 28 msf, recording a 57 per cent YoY increase.