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Industrial and logistics sector sees 8% growth in leasing to 31.6 million sq ft in 2022

Delhi-NCR led the absorption with 7.3 million sq. ft., followed by Mumbai and Bengaluruwith 6.1 million sq. ft and 5.2 million sq. ft in 2022, respectively

Representative Image

Representative Image

Leasing in the industrial and logistics (I&L) sector grew by 8 percent on-year to 31.6 million sq ft in 2022, despite global headwinds, a slowdown in e-commerce demand, and dissipation of the pandemic-period need to hold additional inventories, according to a report by CBRE, a real estate consulting firm.

This is the second-highest leasing activity recorded in the I&L space after the 2019 peak of 32 million sq ft. The total supply in 2022 touched 20.9 million sq ft, the report said.

Also read: Warehousing the next big wave in real estate investments?

Delhi-NCR led the absorption with 7.3 million sq ft, followed by Mumbai and Bengaluru with 6.1 million sq ft and 5.2 million sq ft in 2022. The three cities accounted for almost 60 percent of the leasing activity during the year.

3PL players accounted for about half of the annual space take-up, driven by heightened demand from interlinked stakeholders across the supply chain (wholesalers, retailers, and e-commerce players) for the need to shore up distribution capabilities. Over the last five years, the 3PL players have cumulatively leased more than 60 million sq ft across India, the report said.

It said that a majority of this space take-up was led by domestic occupiers. Engineering and manufacturing firms picked up pace in 2022 with a share of about 16 percent in total leasing, compared to 10 percent in 2021. For local engineering and industrial players, government policy enablers like the Production Linked Incentive (PLI) programme worked as a growth stimulant.

This was led by improvement in leasing sentiments, sustained demand for investment grade assets, and rise in input costs, quoted rental values increased on an annual basis in most micro-markets across cities in 2022.

Only Chennai and Ahmedabad witnessed stable rents during the year. 20-30 percent Y-o-Y growth was witnessed in Pimpri – Chinchwad and Chakan – Talegaon, whereas Hyderabad witnessed 23-25 percent Y-o-Y growth in Northern Corridor. Bangalore witnessed rental growth of 18-20 percent Y-o-Y in the Western Corridor.

“The intent to strengthen supply chain among global and domestic companies drove the leasing activity in 2022. Further, the leasing activity in 2023 is expected to remain range-bound, driven by sustained demand from 3PL, engineering and manufacturing and retail firms. On the supply front, we foresee project completions to exceed the 2022 levels and be in line with space take-up during 2023,” said Anshuman Magazine, Chairman and CEO for India, South-East Asia, Middle East and Africa at CBRE.

“We anticipate 3PL firms to drive leasing activity as companies look to shore up their distribution capabilities. Moreover, rental growth is likely to continue in micro-markets driven by high-quality project completions and the supply-demand imbalance,” Ram Chandnani, Managing Director, Advisory and Transactions Services at CBRE India, said.

On a half-yearly basis, the I&L sector witnessed a 46 percent jump in absorption, which touched 18.8 million sq. ft. in July–December 2022 period, compared to 12.9 million sq ft in January-June 2022.

This was led by sustained leasing by 3PL players (51 percent), engineering and manufacturing firms (16 percent) and retailers (8 percent). Delhi-NCR, Mumbai and Bengaluru led space take-up in July-December 2022 with a combined share of about 61 percent in the total absorption.

Also read: Industrial, warehousing space absorption touches 46 million sq ft in 2022: Report

During the July-December 2022 period, supply addition improved by 11 percent on a half-yearly basis to around 11 million sq ft. These development completions were led by Delhi-NCR, Chennai, Bengaluru and Mumbai, all of which together accounted for about 73 percent of the total supply.

Moneycontrol News
first published: Feb 6, 2023 02:48 pm