Industrial warehousing lease demand drops 12% in June quarter, NCR sees biggest drop  

Leasing in India’s industrial and warehousing sector fell 12 percent year-on-year in the April-June quarter of 2023 to 40 lakh square feet across five major cities

Leasing in India’s industrial and warehousing sector fell 12 percent year-on-year in the April-June quarter of 2023 to 40 lakh square feet across five major cities, as demand for warehouses plunged in Delhi-NCR and Chennai, a report by real estate firm Colliers India has said.

During the same period, Bengaluru, Pune and Mumbai saw a greater demand for leasing warehouses when compared to the year-ago quarter. In Bengaluru, it was up 17 percent to 7 lakh square feet, the Pune region rose 15 percent to 10 lakh sq ft and in Mumbai, the demand was up 12 percent to 9 lakh square feet in the second quarter of this calendar year.

Demand was subdued in Chennai and Delhi-National Capital Region. Delhi-NCR saw a 49 percent drop in demand to 7 lakh sq ft, while Chennai was down 28 percent to 7 lakh square feet in the quarter ended June 30.

Overall, however, the demand was stable across the top five cities in the first half of 2023, with 11 million square feet of leasing, compared to the same period last year (figure for 2022).

Delhi-NCR took the lead with a 25 percent share of leasing, closely followed by Mumbai’s 24.6 percent, the report said. The demand was largely driven by expansion in the third-party logistics (3PL) sector, which ships, stores and tracks goods.

3PL operators accounted for 37 percent of total leasing during the first half of 2023 followed by FMCG and engineering firms, with a share of 12 percent and 11 percent.

“While 3PL continues to lead demand, leasing by FMCG and engineering firms across the major markets in India witnessed a significant rise during the first half of 2023,” said Vijay Ganesh, Managing Director, Industrial & Logistics Services, Colliers India.

Demand from e-commerce rose 68 percent YoY after a lull in the last few quarters. The overall demand was bolstered by increased production capacity, strong government policy support and inclusion of more automated and process-driven manufacturing,  Ganesh said.

Amid steady demand for quality Grade A warehousing, vacancy levels dropped by 110 basis points (bps) to 10 percent. One basis point is one-hundredth of a percentage point.

The period saw fresh supply of 10.7 mn sq ft, a 10 percent YoY dip, as developers remained watchful on the evolving demand scenario. During the six-month period, the second quarter saw some moderation in demand with 4 mn sq ft of leasing.