The industrial and warehousing sector witnessed an absorption of nearly 11 million sqaure feet (msf) in Q1 2023, according to a report by real estate consultancy firm Savills India. Tier I cities saw 77% of the absorption, while tier II and III cities accounted for the remaining 23%.
The report stated that the sector witnessed a fresh supply of 12.4 msf in the same period, of which 9.2 msf (74%) was from tier I cities and 3.2 msf (26%) from tier II and III cities. Further, the market has seen a growth of new projects with improved specifications and high-quality Environmental, Health, and Safety (EHS) standards. This has resulted in a steady rise in the percentage of Grade A supply across cities in recent years. During Q1 2023, grade A space accounted for 52% of the total absorption and supply in the market, which highlighted the significant demand for quality space.
As per the report, Delhi-NCR, Mumbai, Bengaluru, Chennai and Pune have consistently contributed the most to industrial and warehousing segment absorption in India over the years. In Q1 2023, Delhi-NCR secured the top position with highest absorption rate of 19%, closely followed by Mumbai with 14%. Bengaluru and Chennai witnessed absorption rates of 9% and 8%, respectively. Tier II and Tier III cities collectively accounted for 23% of the total absorption.
“The industrial and logistics sector is poised for significant growth in 2023, with a projected absorption of over 40 msf. This demand is expected to be driven by emerging Tier II and III cities, a growing need for urban warehousing, and a major transformation in the Indian manufacturing sector. The shift is further supported by the Performance Linked Incentives (PLIs) and efficient multimodal connectivity plans designed for local and global distribution purposes.” said Srinivas N, managing director industrial and logistics, Savills India.
According to the report, over the last two to three years, the 3PL sector has significantly contributed to the growth of the warehousing industry, accounting for 40-50% of the total demand. The manufacturing sector has also gained momentum, with increased activity supported by various incentive schemes, including the PLI.
In Q1 2023, the 3PL sector continued to drive warehousing demand, accounting for 40% of total absorption. The manufacturing sector followed closely, accounting for 23%, with the retail sector at 11% and FMCG/FMCD at 7%.
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