The absorption of industrial and warehousing space touched 46 million square feet (msf) in 2022 which includes over 36 msf from Tier-I cities and over 10 msf from Tiers II and III cities, according to to report by real estate firm Savills India.
Tier II and III cities saw the highest absorption at 22 percent, followed by Delhi-NCR at 16 percent and Mumbai at 14 percent. Pune and Bengaluru saw absorptions at 13 percent and 12 percent respectively.
Additionally, India witnessed a fresh supply of 47 msf in 2022, of which 34 msf was from tier I cities and close to 13msf from tier II & III cities.
Supply in 2022 dropped by 5.3 percent in Tier-I cities, while it jumped by 44.9 percent in Tier II and III cities. Mumbai, Chennai and Pune topped the list for supply at 10 percent, while Bengaluru saw 9 percent supply in industrial and warehousing space.
Tier II and III cities include Coimbatore, Guwahati, Indore, Nagpur, Lucknow, Jaipur, Rajpura, Bhubaneswar, Kochi/Ernakulam, Patna and Hosur, Madurai, Varanasi, Hubli, Ludhiana.
"3PL and e-commerce sectors continued to drive warehousing demand, together accounting for 52 percent of the total absorption witnessed in 2022, followed by the manufacturing sector at 16 percent and retail sector at 13 percent. Grade A space accounted for 42 percent of total absorption and 48 percent of total supply witnessed in 2022," the report added.
Land Transactions
The report added that the market witnessed transactions of 3,800 plus acres of manufacturing and warehousing land across tier I, II and III cities of the country of which 64 percent was private land and 36 percent was government land.
In 2022, the western zone witnessed the highest share of land transactions at 41 percent followed by the southern zone at 38 percent.
Investments
The warehousing sector raised private equity to the tune of $1.5 billion in 2022. "The market is likely to witness increased interest from investors in this asset class in 2023 owing to inherent domestic demand and expansion of distribution networks in tier II & tier III cities," the report added.
The report further said that the industrial and logistics sector continues to attract investor attention, despite some impact on the asset class's financials in the second and early third quarters of the year due to rising construction costs, the Russia -Ukraine war and the rise in interest rates.
However, the industry quickly returned to normalcy as input costs stabilized and developers were able to adapt and adjust to shifting conditions.
"The industrial and logistics sector is likely to see absorption of 40+ msf in 2023. We expect around 50+ msf of new supply to be infused in the market during the same period," Srinivas N, Managing Director, Industrial and Logistics, Savills India added.
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