The industrial and warehousing sector in India witnessed robust demand in the first half of 2024, with approximately 13 million square feet of leasing activity, marking a 17 per cent year-on-year growth. According to India Industrial And Warehousing Marketing Snapshot by Colliers, Chennai and Delhi NCR led this demand, each accounting for over 3 million square feet of leasing in H1 2024. Third Party Logistics (3PL) players were the primary occupiers, contributing to 36 per cent of the total demand, followed by significant contributions from the engineering and FMCG sectors.
In H1 2024, Chennai and Delhi NCR each saw more than 3 million square feet of leasing demand, with the 3PL segment driving this demand, accounting for a 36 per cent share, followed by significant contributions from the engineering and FMCG segments. Additionally, Q2 2024 recorded about 7.5 million square feet of new supply, marking the highest in the last two years.
“On a quarterly basis, Q2 2024 saw about 6 million square feet of industrial and warehousing demand across the top five cities, a 48 per cent rise year-on-year. Delhi NCR significantly drove the quarterly demand with 1.8 million square feet of leasing, accounting for a 30 per cent share. The demand in this region was led by substantial uptake of industrial and warehousing space in Farukhnagar and Sonipat micro markets,” said Vijay Ganesh, Managing Director, Industrial & Logistics Services, Colliers India.
In Q2 2024, the Grade A gross absorption across key cities showed significant year-on-year changes: Bengaluru saw a 71 per cent increase from 0.7 million square feet in Q2 2023 to 1.2 million square feet in Q2 2024, with a cumulative increase from 1.4 million square feet in H1 2023 to 1.7 million square feet in H1 2024, reflecting a 21 per cent growth. Chennai experienced an 86 per cent rise, from 0.7 million square feet in Q2 2023 to 1.3 million square feet in Q2 2024, and an 88 per cent jump from 1.7 million square feet in H1 2023 to 3.2 million square feet in H1 2024. Delhi NCR recorded a substantial 157 per cent growth, from 0.7 million square feet in Q2 2023 to 1.8 million square feet in Q2 2024, and a 14 per cent increase from 2.8 million square feet in H1 2023 to 3.2 million square feet in H1 2024.
Conversely, Mumbai saw a 33 per cent decline, from 0.9 million square feet in Q2 2023 to 0.6 million square feet in Q2 2024, and a 7 per cent decrease from 2.7 million square feet in H1 2023 to 2.5 million square feet in H1 2024. Pune's absorption remained stable at 1.0 million square feet for both Q2 2023 and Q2 2024, with a slight decrease from 2.4 million square feet in H1 2023 to 2.3 million square feet in H1 2024, indicating a 4 per cent drop. Overall, the total Grade A gross absorption across these cities rose by 48 per cent from 4.0 million square feet in Q2 2023 to 5.9 million square feet in Q2 2024, and by 17 per cent from 11.0 million square feet in H1 2023 to 12.9 million square feet in H1 2024.
“Driven by healthy demand across major cities and supportive government policies, developers have been infusing high-quality warehousing facilities with technologically advanced features. With significant completions in the first half of the year, 2024 is likely to witness Grade A supply infusion of 20-25 million square feet,” added Ganesh.
3PL Demand Steady in H1 2024, Rising Leasing Activity from Other Segments
The 3PL segment continued to dominate with about 36 per cent of the demand, while the engineering, FMCG, and electronics segments each contributed 12-16 per cent. Both the engineering and electronics segments saw over 1.7 times leasing activity compared to H1 2023.
“With strong macroeconomic indicators, India’s industrial and warehousing market continues to grow, likely sustaining momentum into the second half of the year. Upward trends in Manufacturing PMI and IIP reflect healthy industrial activity, which is likely to spur demand for industrial and warehousing spaces. The Manufacturing PMI has been in the expansionary zone since July 2021, remaining close to 60 in recent months. Recent budgetary announcements will improve logistics efficiencies, catalyse demand, and attract investments in the sector,” said Vimal Nadar, Senior Director & Head of Research, Colliers India.
Supply Trends and Market Outlook
With supply infusion outpacing demand for Grade A warehousing spaces, India's overall vacancy levels increased by 210 basis points annually, standing at 12.2 per cent at the end of H1 2024. Developers anticipating heightened demand in upcoming quarters have introduced 14.4 million square feet of fresh supply in H1 2024, a 35 per cent year-on-year rise. Delhi NCR accounted for about 40 per cent of these completions with 5.7 million square feet of new industrial and warehousing developments. Q2 2024 saw 7.5 million square feet of new supply, marking the highest quarterly supply infusion in the last two years. Amidst healthy demand and high-quality supply infusion, rentals in key micro markets saw an appreciable uptick.
Large-sized Deals Account for 35 per cent of Total Leasing
During H1 2024, large deals (over 200,000 square feet) comprised about 35 per cent of the demand. Although most of these larger deals were from 3PL players, the electronics and FMCG sectors also had substantial warehousing space requirements. Chennai and Delhi NCR dominated these large-sized deals.
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