The industrial and warehousing sector touched a total absorption of 22.4 million square feet (msf) in H1 2023, a seven percent increase compared to the 20.9 msf absorbed in the first half of 2022, according to a report by Savills India.
Tier I cities accounted for 75 percent of the total absorption in the first half of 2023, while tier II and III contributed the remaining, the report mentioned.
Tier II and III cities witnessed a 22 percent year-on-year growth in absorption, increasing from 4.1 msf in the first half of 2022 to 5.0 msf in H1 2023.
Among the Tier I cities, Mumbai emerged as the leading city in the country with the highest absorption of 18 percent. It was closely followed by Delhi-NCR with 14 percent and Pune with 10 percent. Bengaluru and Chennai recorded absorption of 9 percent each.
With more emphasis on quality and compliance, Grade A space accounted for 53 percent of the total absorption in the country in H1 2023, marking a significant increase from 36 percent in the first half of 2022.
The industrial and warehousing sector also witnessed a new supply of 27.4 msf the same period, reflecting a 36 percent growth from the 20.2 msf recorded last year.
E-commerce takes a hit
According to the report, the e-commerce sector absorption dropped from 13 percent last year to 3 percent in H1 2023.
While retail saw a drop of 1 percent, 3PL saw the maximum demand up from 37 percent to 44 percent this year. This was followed by the manufacturing sector, up by 5 percent. z
The report said that the 3PL sector has played a significant role in driving demand, accounting for approximately 40 percent to 50 percent of the total demand. The manufacturing sector has also gained momentum due to increased activity backed by various incentive schemes.
“Driven by inherent domestic demand and the expansion of distribution networks in tier II and tier III cities, the industrial and logistics sector is on a growth path. The 3PL, manufacturing, urban warehousing and retail sectors are likely to contribute significantly to the absorption. We expect absorption over 40 msf in 2023," Srinivas N, Managing Director, Industrial and Logistics, Savills India said.
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