The growth rate for industrial and logistics ( I&L) portfolio leasing is likely to slow down 32-35 million square feet (msf) in 2023 because of global headwinds, according to a report by CBRE.
The global real estate consultant's '2023 India Market Outlook' report said that the I&L supply forecast may shoot past the 2022 levels and touch 24-26 msf in 2023.
The share of project completions by prominent global/domestic developers is expected to increase to 40 percent in 2023-24 from 37 percent in 2021-22, the report said.
The demand is expected to be predominantly driven by 3PL and engineering and manufacturing occupiers.
The report points to anticipated heightened interest from FMCG, retail and electronics and electrical firms. Moreover, the share of large-sized deals ranging from 32-35 percent is expected in 2023.
“The government’s strong capex programme, with a focus on infrastructure development and capacity building across sectors, is aimed at driving investment. As the second-largest employment generator in India, the real estate sector will continue to be a focus area for these investments," Anshuman Magazine, Chairman and CEO for India, South-East Asia, Middle East and Africa at CBRE, said.
The I&L sector occupiers are likely to move towards achieving operational efficiencies and rationalise cost in a multi-user facility, and this is expected to push the take-up of large-sized spaces hereon, he added.
The way forward
The government's comprehensive logistics plan, supply-side interventions such as a unified policy framework, interconnected infrastructure, digital transformation, and a skilled ecosystem, and a detailed policy on warehousing standards are expected to reduce the cost of logistics to a single digit of GDP.
The report predicts further rental growth in 2023, with occupiers prioritising prime locations for expansion, but the non-availability of ready-to-move-in supply would shift their focus towards secondary locations which would enable them to leverage comparatively lower rentals.
"Smart warehouse tech has seen rapid uptake in recent years, allowing occupiers to improve efficiencies, augment order handling capabilities and resolve labour shortages. Additionally, ESG compliance is no longer an additional feature but a necessity, marking the competitiveness of a new project among potential tenants," the report said.
It added that supply chain diversification may impact leasing activities. Demand centres would see more robust leasing as several occupiers prefer to locate their warehouses closer to consumption hubs to reduce transportation costs.
Focus on faster deliveries and moving close to end-users have increased the need for smaller I&L spaces within the city. "This trend is expected to fuel the growth of multi-level warehouses in the suburbs of Tier – I locations, which would help solve the urban logistics (last mile logistics) puzzle," the CBRE report said.
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