Chennai and Kolkata reported the maximum increase in construction cost for warehousing and manufacturing, respectively, since the first half (H1) of the Covid-19 pandemic-hit 2020.
According to data released by Savills India, Kolkata recorded the maximum rise in general manufacturing costs at 6.7 per cent, followed closely by Chennai at 6.5 per cent. For Grade-A Warehousing, Chennai led the surge with a 6.7 per cent increase. Bengaluru and Hyderabad each reported a 6 per cent rise in the same category.
What's the reason behind spiralling cost?
Experts said that the increase can be attributed to the rise in the prices of crude oil, steel, aluminium, cement, labour, equipment rentals and costs of plumbing and fixtures.
The construction cost for the general manufacturing facility in Kolkata went up to Rs 3,265 per square feet (psf) in H1 2024 from Rs 3,060 psf in H1 2020, registering a 6.7 per cent growth. In Chennai, the construction cost for the general manufacturing facility in H1 2020 was Rs 3,010 psf, which rose by 6.5 per cent to Rs 3,210 psf in H1 2024, according to Savills India's data.
Similarly, the construction cost for Grade-A Warehousing facility in Chennai rose by 6.7 per cent to Rs 2,070 psf in H1 2024 from Rs 1,940 psf in H1 2020. In Kolkata, the construction cost for Grade-A Warehousing facility stood at Rs 2,075 psf in H1 2024, 6.5 per cent up from Rs 1,980 psf in H1 2020.
The construction cost for the general manufacturing in Delhi-National Capital Region (NCR), Bengaluru and Hyderabad was Rs 3,230 psf and Rs 3,175 psf, respectively. Per square feet construction cost for Grade-A Warehousing facility in H1 2024 in Delhi NCR, Bengaluru and Hyderabad stood at 2,055 and 2,035, respectively.
Logistics and warehousing industry on the cusp of transformation
Sumit Rakshit, Managing Director (MD), Project Management Services, Savills India, said that country’s logistics and warehousing industry is on the brink of a significant transformation. This is largely because India is emerging as a global manufacturing hotspot, he added.
“Naturally, the demand for manufacturing and warehousing facilities is expected to surge in the coming years. We expect construction costs for industrial and warehousing projects to increase marginally over the next three-four years. The magnitude of growth is dependent on material costs, labour, equipment rental costs, interest rates and other related costs,” Rakshit said.
India's rapid urbanisation, robust infrastructure development, and economic growth have collectively driven significant demand, boosting construction activity in the industrial and logistics sector.
The report said that supply is projected to surpass 60 million square feet annually over the next three-four years. Despite rising costs, India remains cost-competitive, with construction expenses for manufacturing and warehousing substantially lower than in developed nations such as the USA, the UK, France, and Germany, owing to affordable labour and relatively lower material costs.
Srinivas N, MD, Industrial and Logistics, Savills India, said the manufacturing and warehousing sectors are experiencing substantial construction, driven by increasing market demand, supportive government policies, growth in the fast moving consumer goods (FMCG) and fast moving consumer durables (FMCD), electronics, apparel, electric vehicle (EV) and allied sectors.
“The changing occupier preferences to meet ESG [environmental, social, and governance] standards are likely to lead to increased demand for sustainable and energy-efficient buildings, driving the adoption of green construction practices in industrial and warehousing sectors,” he added.
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