Mumbai leads industrial, logistics leasing with 22% growth in Jan-Sep’23

Mumbai led pan-India industrial and logistics space absorption activity among the top eight cities in India with a 19% share in the overall leasing activity during the Jan-Sep’23 period, according to CBRE South Asia’s report India Market Monitor Q3 2023. The report highlights the growth trends and dynamics across the real estate sector in India.

The total industrial and logistics absorption in Mumbai during this period stood at 5.3 million square foot (msf), compared to 4.3 msf in Jan-Sep ’22, registering a growth of 22% YoY. Third party logistics (3PL), engineering and manufacturing and FMCG companies dominate absorption in Jan-Sep’23. The city also recorded a supply addition of 3.4 msf during the Jan-Sep’23 period. During the Jul-Sep’23 quarter (Q3 2023), total leasing in the city stood at 1.3 msf and a supply addition of 0.9 msf was recorded. 

On a pan-India basis, the industrial and logistics (I&L) sector is likely to touch a five-year high absorption mark and touch 36-38 msf in 2023 across top eight cities in India. Supply addition, too, is expected to outperform, touching 35-37 msf by the year-end, driven by the completion of pent-up projects. The leasing in the I&L sector grew by 13% YoY in the Jan-Sep’23 period. The total absorption across the top eight Indian cities stood at 27.3 msf compared to 24.2 msf during the same period last year. Mumbai, Chennai and Delhi-NCR collectively accounted for a share of 56% in the leasing activity during the Jan-Sep’23 period. 

Space absorption in Jan-Sep’23 across top cities

Source: CBRE South Asia

During the Jan-Sep’23 period, third-party logistic (3PL) players dominated leasing with a 45% share, followed by engineering and manufacturing (E&M) companies (15%), auto and ancillary (7%), FMCG (6%) and electronics and electricals (5%). Supply addition was registered at 28 msf, recording a 57% YoY increase in Jan-Sep’23. A combined contribution of 56% has been recorded in supply additions during the Jan-Sep ’23 period from Delhi-NCR, Chennai and Kolkata collectively.

In Q3 2023, among the cities, Chennai recorded the highest absorption with 2.1 msf, followed by Bangalore and Mumbai, recording 1.7 msf and 1.3 msf, respectively. The combined leasing share of these three cities accounted for approximately 62%. During the Jul-Sep’23 quarter, 3PL players accounted for 50% of the leasing activity, followed by engineering and manufacturing at 13%, and electronics and electrical companies at 8%. As per the regional trends, domestic corporations took the lead in leasing activities with a 59% share, followed by EMEA corporations at 25% and APAC corporations at 12% during the same period. The I&L sector also witnessed a 92% YoY increase and 12% QoQ growth in warehouse completions in the July-Sep’23 quarter.

Anshuman Magazine, chairman and CEO – India, South-East Asia, Middle East and Africa, CBRE, said, “We are witnessing a remarkable shift in the I&L sector. With the surge in quality supply additions, robust festive demand, and the completion of pent-up projects, we anticipate the overall absorption to touch a 5-year high, reaching an impressive 36-38 msf by the end of 2023. Moreover, the active participation of larger developers backed by institutional funds, contributing around 40% to the completed projects, underscores the sector’s growth potential. In select micro-markets, the prospect of rising rents is bolstered by the premium commanded by new, investment-grade, technologically advanced and strategically situated assets.”

Ram Chandnani, managing director, advisory and transactions services, CBRE India, said, “As we delve into the industrial and logistics landscape, it’s clear that dynamic shifts mark the path forward. The accelerated embrace of ‘multipolar’ supply chain strategies, complemented by the government’s pro-investment initiatives, continues to propel the 3PL and engineering and manufacturing sectors, being at the forefront of I&L absorption. We also anticipate a surge of interest from FMCG, retail, and electronics and electrical sectors, driven by consumer demand. Additionally, domestic corporates have taken the lead in leasing activities, capturing a substantial 59% share, with EMEA and APAC Corporates contributing significantly at 25% and 12% respectively during Q3 2023”.