Logistics and industrial leasing crosses 50 mn sq ft mark in the last two years

MUMBAI : Logistics and industrial leasing in India has crossed the 50 m sq ft mark in the last two years on the back of strong economic and industry fundamentals, rapidly growing sectors like manufacturing and third party logistics (3PL), and supportive government policies like the Production Linked Incentive scheme, a report by Cushman & Wakefield has said.

Industrial leasing witnessed a 23% y-o-y growth in 2023 at nearly 16 msf, with Pune and Chennai accounting for 8.37 msf (53% of pan India leasing volume) and 3.81 msf (24% of pan India leasing volume) respectively.

The growth in industrial leasing indicates that manufacturing is on an uptrend on the back of healthy capacity utilization, implementation of business plans by domestic firms and incentivization of investments by multinationals through favourable government policies such as the multi-sector PLI scheme.

In terms of cities, Chennai’s logistics and industrial sector witnessed a stellar 2023, driven by robust leasing activity across warehouses and industrial sheds. With 10.78 msf of overall leasing in 2023, the city registered 2.1x growth over 5.16 msf recorded in 2022. For the full year 2023, warehouse leasing activity stood at 6.97 msf, nearly two-fold increase compared to 2022, it noted.

Oragadam submarket witnessed robust demand with gross leasing reaching 2.14 msf, a 5x growth compared to 2022. Throughout the year, demand was predominantly driven by the 3PL/logistics sector, contributing 64% to the yearly gross leasing activity, followed by the engineering and manufacturing sector with a 31% share.

For the full year, manufacturing tenants leased 3.8 million sq ft in Chennai, with Oragadam and Sriperumbudur dominating. Electronics and automobile sectors held the top spots in the city with 28% and 24% shares respectively.

Leasing for warehouses dips by 7%

In 2023, warehousing leasing dipped slightly by 7% to 37.7 msf from 40.4 msf in 2022. According to the data, while warehouse leasing by e-commerce firms posted a decline in 2023, demand from 3PL operators, manufacturing and retail firms remained strong. This shift suggests a possible growing trend of e-commerce companies outsourcing their logistics and warehousing operations to 3PL specialists, allowing them to focus on their core business activities, the report showed.

Mumbai emerged as the top warehousing hub in 2023, capturing a commanding 27% share of the market. Chennai followed closely with 19%, while Delhi and Pune held 18% and 12% shares, respectively.

Delhi-NCR warehousing market

Delhi-NCR saw a noticeable decline in activity, likely due to fewer major space transactions in the latter half of the year. This was effectively offset by the continuous expansion of Chennai and Pune, ensuring consistent overall activity across India.

Delhi NCR witnessed leasing of 3.05 msf in the warehousing sector during the second half of 2023, which was 57% lower on a y-o-y basis. This could be attributed to the limited number of large deals executed during 2023. With this, annual warehousing demand for 2023 reached 6.8 msf, a drop of 52% when compared to 2022, although in line with the average witnessed over the last five years.

In H2 2023, Gurgaon dominated warehouse leasing with a share of 52%, followed by 22% share of Ghaziabad and 13% share of Sonipat. These top-3 submarkets also held a cumulative share of 81% in annual warehouse leasing for 2023, the report showed.

Industrial leasing activity in NCR in the second half of 2023 was recorded at 0.3 msf, 58% lower than an exceptional first half of 2023, and 34% lower than H2-22. However, the annual industrial leasing in NCR (0.98 msf) was merely 8% lower than a good year of 2022, and it remained 40% higher than the average volume of the past five years. The industrial demand for H2-23 was entirely concentrated in Gurgaon, of which Manesar held a share of 42%, it said.

“Logistics & Industrial segment in India has defied global uncertainties to achieve a stable growth for two years in a row. This is fuelled by a confluence of factors, including strong economic and industry fundamentals, rapidly growing sectors like manufacturing and 3PL, and supportive government policies like the PLI scheme. We expect this momentum to continue in 2024, solidifying L&I as a key driver of Indian real estate growth,” said Abhishek Bhutani, Managing Director, Logistics & Industrials, Cushman & Wakefield.