Activity in Grade A industrial and warehousing facilities continues to be resilient, with gross absorption during H1 2022 in the top 5 cities touching 10.8 million sq feet, a 7 percent increase year-on-year (YoY), a new report has said.
Delhi-NCR accounted for the highest activity at 28 percent share, followed by Pune with 24 percent share in demand. However, on the supply side, vacancy declined 24 percent YoY to 11.8 million sq feet in H1 2022. Developers postponed fresh supply in light of high input costs and are completing projects after seeking pre-commitments from occupiers, a report by Colliers said.
About 55 percent of the gross absorption was led by third-party logistics players, followed by the Engineering and Automobile sectors with a share of 12 percent each.
“The first half of this year has seen several large deals with average deal size up 27 percent YoY. Grade A supply in preferred micro markets across key markets in India continues to remain muted owing to construction slowdown on account of raise in construction costs. This has led to short-term rent increases. Third-Party Logistics players continue to dominate demand in the first half of this year and the trend is expected to continue in the next few quarters as well. We are also witnessing more Tier II city enquiries as key players are strengthening their last-mile delivery supply chain to be proximate to customers,” said Shyam Arumugam, Managing Director, Industrial and Logistics Services, Colliers India.
Supply declines as developers await pre-commitments
Overall, grade A supply declined 24 percent YoY across the top five cities to about 11.8 million sq feet in the first half of 2022. Despite low supply and steady leasing, vacancy level rose during the quarter. Grade A vacancy levels rose to 11.1 percent at the end of Q2 2022, from 9.8 percent in Q1 2022. This was largely led by strong leasing activity in Delhi-NCR, Chennai, and Pune. The rise in vacancy was led by Delhi-NCR wherein vacancy levels saw an increase during the quarter, it said.
However, Delhi-NCR dominated leasing activity in the first half of 2022 with a share of 28 percent. This demand was led by large deals that accounted for about 77 percent of the total leasing. Deals by third-party logistics players led most of the activity through large deals. Majority of the activity was in the Tauru Road location. Pune accounted for 24 percent of the leasing in H1 2022. Automobile sector continued to lead the demand with a notable share of 40 percent in total leasing of the city, followed by Third-party logistics sector at 27 percent share.
Large deals account for 75 percent of the leasing
Deals above 100,000 sq feet accounted for 75 percent of the total leasing. This was led by larger deals by third-party logistics players and fast-moving consumer goods (FMCG) companies.
“Occupiers, especially third-party logistics players and e-commerce players are increasingly taking up larger integrated warehousing space. On the supply side, we may see some limitations over the next few quarters as developers face supply chain constraints and rising input cost materials,” said Vimal Nadar, Senior Director, and Head of Research Colliers India.
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