Industrial and logistics leasing activity in Mumbai grew by 36% year on year, to touch 6.1 million square foot in 2022, says a report released on February 6, 2023. Industrial and logistics space take-up in India’s financial capital Mumbai stood at 4 million square foot (msf) during the last 6 months of the year, shows the report by CBRE South Asia. According to the report titled Industrial & Logistics Figures H2 2022, the supply in the city stood at 1.8 msf during the July-December period of 2022.
The sectors that drove absorption for the segment included third-party logistics (79%), e-commerce (11%) and engineering & manufacturing (4%). Key micro-markets that led space take-up in Mumbai during the 6-month period were Bhiwandi, followed by Navi Mumbai.
Pan-India account
On a pan-India basis, I&L sector leasing grew by 8% Y-o-Y to touch 31.6 msf in 2022 despite global headwinds, and a slowdown in e-commerce demand and dissipation of the post-pandemic need to hold additional inventories. This is the second-highest leasing activity recorded in the sector after the 2019 peak of 32 msf. The total supply in 2022 touched 20.9 msg.
Delhi-NCR led the absorption with 7.3 msf, followed by Mumbai and Bangalore with 6.1 msf and 5.2 msf in 2022, respectively. The three cities accounted for almost 60% of the leasing activity during the year. All cities recorded stable or increased annual space take-up except Bangalore and Pune.
Third-party logistics players accounted for about half of the annual space take-up, driven by heightened demand from interlinked stakeholders across the supply chain for the need to shore up distribution capabilities. Over the last five years, 3PL players have cumulatively leased more than 60 msf across India. A majority of this space take-up was led by domestic occupiers. Engineering & manufacturing firms picked up pace in 2022 with a share of about 16% in total leasing compared to 10% in 2021. For local engineering and industrial players, government policy enablers like the Production Linked Incentive (PLI) programme worked as a growth stimulant.
Space take-up was dominated by small-sized transactions (<50,000 sq. ft.), with a share of about 40% in 2022. The share of medium (50,000 – 100,000 sq. ft.) and large-sized (more than 100,000 sq. ft.) transactions were about 29% and 31%, respectively during 2022. Mumbai, followed by Delhi-NCR dominated large-sized deal closures in 2022, together accounting for about 44% of large-sized deals. In 2022, 3PL, followed by engineering & manufacturing firms, drove large-sized deal closures with a total share of about 65%.
Led by improvement in leasing sentiments, sustained demand for investment grade assets, and rise in input costs, quoted rental values increased on an annual basis in most micro-markets across cities in 2022. Only Chennai and Ahmedabad witnessed stable rents during the year. 20-30% Y-o-Y growth was witnessed in Pimpri-Chinchwad and Chakan-Talegaon while Hyderabad witnessed 23-25% Y-o-Y growth in northern corridor. Bangalore witnessed rental growth of 18-20% Y-o-Y in the Western Corridor.
Anshuman Magazine, chairman and CEO-India, South-East Asia, Middle East & Africa, CBRE, said, “The intent to strengthen supply chain among global and domestic companies drove the leasing activity in 2022. Further, the leasing activity in 2023 is expected to remain range-bound, driven by sustained demand from 3PL, engineering & manufacturing and retail firms. On the supply front, we foresee project completions to exceed the 2022 levels and be in line with space take-up during 2023.”
On a half-yearly basis, the sector witnessed 46% jump in absorption, which touched 18.8 msf in July-December period compared to 12.9 msf between January and June 2022. This was led by sustained leasing by 3PL players (51%), engineering & manufacturing firms (16%) and retailers (8%). Delhi-NCR, Mumbai and Bangalore led space take-up in the second half with a combined share of about 61% in the total absorption.
During the July-December period, supply addition improved by 11% on a half-yearly basis to over 11 msf. These development completions were led by Delhi-NCR, Chennai, Bangalore and Mumbai, all of which together accounted for about 73% of the total supply.