January 17, 2024: Industrial and warehousing demand across the top five cities remained resilient, recording a marginal 2% annual growth, with 25 million square foot (msf) of gross leasing in 2023, according to a Colliers report.
The report stated that leasing activity picked up in the second half of 2023, witnessing a 26% rise on a half-yearly basis. During the year, Pune led the demand with a 25% share, closely followed by Mumbai at 22%. It highlighted that with more than 5 msf of gross absorption, Chennai witnessed industrial and warehousing leasing demand almost at par with Delhi NCR.
Across the top five cities, the Bhiwandi micro market in Mumbai was the most active market, followed by Chakan-Talegaon in Pune. Together, the two micro markets accounted for about 42% of the share in demand during the year. Third-party logistics players (3PL) continued to be the top occupiers of industrial and warehousing space, contributing to about 40% of the total warehousing demand. The 3PL space uptake was driven by healthy activity in Mumbai and Chennai mainly. Concurrently, leasing by FMCG players remained healthy in 2023, with more than 2.5X times activity as compared to 2022. Meanwhile, engineering and automobile players continued to occupy a significant portion of the leasing pie.
Trends in Grade A Gross Absorption (msf)
| City | 2023 | 2022 | YoY change | Q4 2023 | Q4 2022 | YoY change |
| Pune | 6.3 | 5.6 | 14% | 2.3 | 1.6 | 46% |
| Mumbai | 5.5 | 3.9 | 41% | 1.5 | 1.2 | 27% |
| Chennai | 5.1 | 2.7 | 85% | 1.6 | 0.6 | 185% |
| Delhi NCR | 5.1 | 8.8 | -42% | 1.4 | 1.9 | -27% |
| Bengaluru | 3 | 3.5 | -15% | 0.9 | 1.2 | -24% |
| TOTAL | 25 | 24.5 | 2% | 7.7 | 6.5 | 19% |
Source: Colliers
Note- Data pertains to Grade A buildings.
Trends in Grade A Supply (msf)
| City | 2023 | 2022 | YoY change | Q4 2023 | Q4 2022 | YoY change |
| Delhi NCR | 6.9 | 7.8 | -12% | 2 | 1.9 | 1% |
| Pune | 6 | 4.1 | 47% | 2.2 | 1.3 | 69% |
| Chennai | 4.7 | 2.5 | 92% | 0.9 | 0.2 | 336% |
| Bengaluru | 2.9 | 2.1 | 35% | 1.1 | 0.4 | 183% |
| Mumbai | 2.7 | 2.7 | -2% | 0.2 | 0.3 | -8% |
| TOTAL | 23.2 | 19.2 | 21% | 6.4 | 4.1 | 55% |
Source: Colliers
Note- Data pertains to Grade A buildings
Vijay Ganesh, managing director, Industrial & Logistics Services, Colliers India, said, “While the quantum of leasing by 3PL players continued to remain intact, there was accelerated growth in demand from FMCG, retail and automobile segments, with more than 30% YoY rise in each segment. Going ahead, with the rise in use of Electric Vehicles (EVs) and continuous development in associated infrastructure, the warehousing demand for automobile segment, is expected to grow manifold. With increasing footfalls in malls and physical stores, retail consumption is likely to increase, which in turn would spur higher demand for warehousing spaces. Overall, backed by rising manufacturing output, capital investments, demographic consumption patterns and supportive government policies, 3PL, engineering, automobile, retail and e-commerce segments will continue to see significant momentum in the next few years.”
Q4 2023 witnessed highest ever quarterly leasing in last two years
The report mentioned that the final quarter of 2023, saw about 7.7 msf of leasing, a 19% YoY rise and the highest-ever quarterly leasing in the last two years. Leasing activity during the quarter was significantly higher than the average 6.2 msf quarterly leasing of the last two years (2022 and 2023). Interestingly, with about 1.6 msf of leasing during Q4 2023 Chennai saw over 2.5X times activity as compared to Q4 2022. NH48 and NH16 micro markets of Chennai saw the bulk of the demand during the quarter, largely driven by occupiers from engineering and 3PL players. While the 3PL segment continued to dominate demand during the year, leasing by engineering firms surpassed the 3PL segment during the final quarter of 2023.
Large-sized deals account for about 40% of the total leasing
During 2023, large deals (more than 200,000 sqft) accounted for about 40% of the demand. Amongst these, 3PL companies continued to account for the bulk of share, followed by engineering and FMCG players. Mumbai, followed by Chennai, dominated the chunk of large-sized deals across the top five cities.
Vimal Nadar, senior director & head of research, Colliers India, said “Historically, Delhi NCR and Pune have been driving the industrial and warehousing space demand in India. However, 2023 saw a more balanced distribution of leasing activity across the top 5 cities. While Pune was the frontrunner of industrial and warehousing space uptake in 2023, demand in Mumbai, Chennai and Delhi-NCR was almost at similar levels. Pune, particularly, was the only city to witness consecutive years of demand growth (2022 & 2023). Grade A space uptake in the city was largely driven by engineering and automobile players with about 25-30% share each, surpassing the leasing activity of 3PL players comfortably. All micro markets in the city saw about 2-8% growth in rentals with Talegaon and Hinjewadi recording the highest appreciation in rental values. Looking at the current market fundamentals, the city is poised to grow further in the next few years and will play a key role in demand diversification of the overall India industrial & warehousing market.”
Vacancy levels remain range-bound amidst rising supply and healthy demand
The report also mentioned that, with a 21% YoY rise, the year witnessed about 23.2 msf of new supply indicating improved developer confidence and an optimistic outlook for the next year. Aided by healthy demand, vacancy levels too largely remained steady registering only a 60 basis points (bps) YoY rise. On similar lines of demand, the final quarter saw the highest influx in supply at 6.4 msf, led by Pune and followed by Delhi NCR. Amidst healthy demand and supply, rentals remained range-bound on a quarterly basis; however, rose by up to 5% in select micro markets of Chennai and Pune.
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