July 25, 2023: Industrial and warehousing demand across the top five cities in India was stable during the first six months of 2023 (H1 2023) with 11 million square foot (msf) of leasing, compared to the same period last year (H1 2022), according to a report by Colliers India. Delhi- NCR continued to lead demand with 25% share, closely followed by Mumbai at 24.6%. While most of the cities saw a single-digit change in demand, Mumbai witnessed a notable 28% YoY increase in leasing during H1 2023.
The consistent trend in leasing was primarily driven by 3PL operators, accounting for 37% of total leasing in H1 2023, followed by FMCG and engineering firms with a share of 12% and 11% respectively. While 3PL players drove demand during the period, the share of leasing by 3PL players dipped to 37% from 53% in H1 2022. At the same time, leasing by FMCG players experienced an impressive three-fold rise as they expanded their presence in key markets such as Delhi NCR and Mumbai.
Vijay Ganesh, managing director, industrial and logistics services, Colliers India, said, “While 3PL continues to lead demand, leasing by FMCG and engineering firms across the major markets in India witnessed a significant rise during the first half of 2023. Notably, demand from E-commerce rose 68% YoY, after a lull in the last few quarters. The overall demand for the industrial and warehousing market has been bolstered by various factors, including increased production capacity, strong government policy support and inclusion of more automated and process-driven manufacturing. While 3PL players are likely to dominate demand, we expect strong and steady momentum in leasing from other segments as well”.
Trends in grade-A gross absorption in top 5 cities
| City | H1 2023 | H1 2022 | YoY change |
| Delhi NCR | 2.8 msf | 3 msf | -8% |
| Mumbai | 2.7 msf | 2.1 msf | 28% |
| Pune | 2.4 msf | 2.7 msf | -9% |
| Chennai | 1.7 msf | 1.7 msf | 1% |
| Bangalore | 1.4 msf | 1.5 msf | -4% |
| Total | 11 msf | 11 msf | 0% |
Amidst steady demand for quality grade A warehousing spaces, vacancy levels during H1 2023 dropped by 110 basis points (bps) to 10%. This period saw fresh supply of 10.7 msf, down by 10% YoY. During the six-month period, the second quarter (Q2 2023) saw some moderation in demand with 4 msf of leasing. Pune led the demand during the quarter with a 26% share.
Vimal Nadar, senior director and head of research, Colliers India, said, “India’s high performance economic indicators are displaying encouraging signs of improvement, with steady gains in manufacturing output and investment. This augurs well for the sector in the short to medium term”.
Trends in grade-A supply in top 5 cities
| City | H1 2023 | H1 2022 | YoY change |
| Delhi NCR | 3.7 msf | 5.1 msf | -27% |
| Pune | 2.3 msf | 1.6 msf | 48% |
| Chennai | 2 msf | 2.2 msf | -11% |
| Mumbai | 1.6 msf | 1.8 msf | -11% |
| Bangalore | 1.1. msf | 1.2 msf | -10% |
| Total | 10.7 msf | 11.9 msf | -10% |
Trends in grade-A vacancy rate in top 5 cities
| City | H1 2023 | H1 2022 |
| Delhi NCR | 14.1% | 16.1% |
| Mumbai | 12.1% | 11.5% |
| Bangalore | 6.8% | 6.1% |
| Chennai | 5.6% | 6.3% |
| Pune | 5.5% | 8.9% |
| Total | 10% | 11.1% |
During H1 2023, large deals (over 100,000 sqft) accounted for about 75% of the demand. Amongst these larger deals, 3PL companies accounted for the largest share, followed by FMCG and engineering players. Mumbai followed by Pune dominated the chunk of large-sized deals across the top five cities.
