The industrial and warehousing sector clocked a total absorption of 22.4 million square foot (msf) in the first six months of 2023 (H1 2023), up by 7% compared to the 20.9 msf absorbed in H1 2022, according to a report by Savills India. The report further highlighted that Tier I cities accounted for 75% of the total absorption in H1 2023, while Tier II and III contributed the rest 25%.
Tier II and III cities witnessed a 22% YoY increase in absorption, rising from 4.1 msf in H1 2022 to 5 msf in H1 2023. Of the Tier I cities, Mumbai led the absorption with a share of 18%, closely followed by Delhi-NCR with 14% and Pune with 10%. Bangalore and Chennai recorded absorption of 9% each.
The demand for Grade A warehousing and ready fitted-out factory space has seen a substantial surge in recent years. With more emphasis on quality and compliance, Grade A space accounted for 53% of the total absorption in India in H1 2023, marking a significant increase from 36% in H1 2022. The industrial and warehousing sector also witnessed a new supply of 27.4 msf in January-June’23, reflecting a growth of 36% YoY from the 20.2 msf recorded last year.
The e-commerce sector absorption dropped from 13% in H1 2022 to 3% in H1 2023. While the retail sector witnessed a drop of 1%, 3PL saw the maximum demand, increasing from 37% in H1 2022 to 44% in H1 2023. This was followed by the manufacturing sector, witnessing an increase of 5% with a share of 22% in H1 2023. The retail sector accounted for 13% of the total absorption, and the FMCG/FMCD sector accounted for 6%.
The 3PL sector has played a significant role in driving demand, accounting for approximately 40-50% of the total demand. The 3PL, manufacturing, urban warehousing and retail sectors are likely to contribute significantly to the absorption. As per the report, an absorption of over 40 msf is expected in 2023.
In H1 2023, the market witnessed transactions of close to 1,500 acre of manufacturing and warehousing land in the country, of which 72% was for manufacturing purpose, 22% was for warehousing and 5% for mixed use development. Additionally, more than 50% of the transactions were dedicated to captive usage.
