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Industrial and warehouse leasing stays robust as third-party logistics players lead demand: Colliers

Deals above 100,000 sq ft accounted for 80 percent of total leasing led by larger transactions from third-party logistics players and e-commerce companies.

Representative image (Image: Shutterstock)

Representative image (Image: Shutterstock)

Activity in Grade A industrial and warehousing facilities continues to be robust during the first quarter of 2022 with gross absorption in the top five cities at 6.2 million square feet (mn sq ft), an 11 percent increase from a year ago, a report by Colliers said on April 27.

Demand was led by heightened leasing in Delhi-NCR and Mumbai. Vacancy across Grade A projects also declined during the quarter, indicating healthy demand. Overall, demand was steered by robust warehousing by third-party logistics players, said the India Industrial and Warehousing Market Snapshot.

Growing concerns about rising construction costs has spiked rents quoted for upcoming developments across markets. Developers are now looking to cater to build-to-suit demand as opposed to speculative supply addition, it noted.

Gross absorption of Grade A commercial spaces in Delhi-NCR stood at 1.7 mn sq ft in the first quarter of 2022; Pune 1.6 mn sq ft; and Mumbai 1.3 mn sq ft.

About 50 percent of the gross absorption was led by third-party logistics players, followed by engineering and automobile sectors with a share of 17 and 12 percent respectively, it said.

“The trend is expected to continue in the next few quarters as logistics and e-commerce players take up larger spaces in top cities as they scale operations in Tier-I cities,” said Shyam Arumugam, managing director, industrial and logistics services, Colliers India.

Overall, grade A supply declined 16 percent year on year across the top five cities to about 6.4 million sq feet. Lower supply and robust leasing during the quarter led to a drop in vacancy. Grade A vacancy levels declined to 9.8 percent from 11.8 percent in the fourth quarter of 2021 led largely by strong leasing in Delhi-NCR, Mumbai and Pune.

Delhi-NCR dominated leasing with a share of 28 percent. Demand was led by large deals that accounted for 91 percent of total leasing. Transactions by third-party logistics players led most of the activity which took place in Luhari. Pune accounted for 26 percent of the leasing. The automobile sector continued to lead demand with a notable share of 43 percent in the city, followed by engineering at 20 percent.

Large deals account for 80% of the leasing

Deals above 100,000 sq ft accounted for 80 percent of the total leasing. This was led by larger deals from third-party logistics players and e-commerce companies.

“We are seeing larger warehousing deals which has pushed up the average deal size by 30 percent to about 1.1 lakh sq ft. This shows that occupiers and third-party logistics players especially are increasingly taking up larger integrated warehousing space led by higher demand and shorter delivery timelines,” said Vimal Nadar, head and senior director of research at Colliers India.

 

 

 

 
Vandana Ramnani
first published: Apr 27, 2022 11:53 am