Third Party Logistics Players, in Chennai and Delhi-NCR drive industrial & warehousing demand in H1FY24
CHENNAI : The industrial and warehousing sector across India’s top five cities saw robust activity in the first half of 2024, with approximately 13 million sq ft of leasing activity and a 17 per cent year-on-year (Y-o-Y) growth, according to a Colliers report released on Friday. Leading the demand were Chennai and Delhi NCR, which together accounted for about half of the overall leasing. This growth was driven by Third Party Logistics (3PL) players, who occupied 36 per cent of the total warehousing space during this period.
Industrial, warehousing demand rise by 48 per cent
The quarter ending on June 30, 2024 alone saw about 6 million sq ft of industrial and warehousing demand across the top five cities, marking a 48 per cent Y-o-Y increase. Delhi NCR was a major contributor in this period, accounting for 1.8 million sq ft of leasing and holding a 30 per cent share of the quarterly demand.
Demand in Chennai nearly doubled
Chennai witnessed a near doubling of demand compared to the same period last year, largely fuelled by the warehousing needs of 3PL players. On a more granular level, substantial uptake of warehousing space was observed in micro markets such as Bhiwandi (Mumbai), Chakan-Talegaon (Pune), and Oragadam (Chennai), each recording more than 1.5 million sq ft of space leased.
Major uptake in micro markets
The Farukhnagar and Sonipat micro markets in the region were particularly active. Developers, recognising the healthy demand and bolstered by supportive government policies, have been investing in high-quality, technologically advanced warehousing facilities.
Commenting on this, Vijay Ganesh, Managing Director of industrial and logistics services at Colliers India, said, “Taking cognisance of healthy demand across major cities and supportive government policies, developers have been infusing high-quality warehousing facilities replete with technologically advanced features. With significant completions in the first half of the year, 2024 is likely to witness Grade A supply infusion to the tune of 20-25 million sq ft.”
Leasing activity in engineering, FMCG, & electronics sectors
In addition to the dominant 3PL players, other sectors such as engineering, fast-moving consumer goods (FMCG), and electronics also showed significant leasing activity, each holding a 12-16 per cent share of the overall demand.
The engineering and electronics sectors, in particular, saw over 1.7 times the leasing activity compared to the first half of 2023. This diverse demand is expected to continue growing, driven by favourable industry-specific policies and a supportive regulatory environment.
Large-sized deals represent 1/3rd demand
Large deals (greater than 200,000 sq ft) represented about 35 per cent of total demand in the first half of the year (H1 2024), with 3PL players, electronics, and FMCG sectors being the primary drivers. Chennai and Delhi NCR were the top cities for these large-sized deals.
Rise in vacancy levels in H1 2024
However, with the supply of Grade A warehousing spaces exceeding demand, overall vacancy levels in India rose by 210 basis points Y-o-Y, reaching 12.2 per cent at the end of H1 2024.
Developer anticipation of increased demand led to the introduction of 14.4 million sq ft of new supply in the first half of 2024, representing a 35 per cent Y-o-Y increase. Delhi NCR alone accounted for about 40 per cent of the new completions, with 5.7 million sq ft of new industrial and warehousing developments.
The April-June quarter saw the highest quarterly supply infusion in the last two years, with about 7.5 million sq ft of completions in the top five cities, a 53 per cent Y-o-Y rise. Amid this healthy demand and high-quality supply infusion, rentals in key micro markets experienced a notable uptick.
Future outlook of the industrial & warehousing market
India’s industrial and warehousing market is poised for continued growth in the second half of the year, supported by strong macroeconomic indicators such as the Manufacturing PMI and Index of Industrial Production. The Manufacturing PMI has remained in an expansionary zone since July 2021, staying close to 60 in recent months.
Vimal Nadar, senior director and head of research at Colliers India, said, “Recent budgetary announcements will improve logistics efficiencies, catalyse demand and attract investments in the industrial and warehousing sector. Additionally, increasing platform level investments will lead to an influx of superior quality industrial and warehousing space in the next few years.”