PremiumThe rapidly expanding and highly competitive e-commerce market has fuelled the growth of industrial, logistics and warehousing since the last two years. The industrial & logistics sector is likely to see absorption of 40+ mn sq. ft in 2023
New Delhi: The absorption of industrial and warehousing space rose 6% to 46.3 million square feet (msf) in 2022, which includes over 36 msf from tier-one cities and over 10 msf from tiers-two and three cities, according to a report by real estate firm Savills India.
Lease of industrial and warehouse space increased 3% in 2022 across eight key tier-one cities, from 35.1 million square feet to 36.2 million square feet. Space consumption in tier-two and three cities grew from 8.6 million square feet in 2021 to 10.1 million square feet in 2022. These cities include Coimbatore, Guwahati, Indore, Nagpur, Lucknow, Jaipur, Rajpura, Bhubaneswar, Kochi/Ernakulam, Patna, Hosur, Madurai, Varanasi, Hubli and Ludhiana.
Tier two and three cities saw the highest absorption at 225, followed by Delhi-NCR at 16% and Mumbai at 14%. Pune and Bengaluru saw absorptions at 13% and 12%, respectively.
Third-party logistics (3PL) and e-commerce sectors continued to drive warehousing demand, together accounting for 52% of the total absorption witnessed in 2022. The manufacturing sector contributed 16% in demand while the retail sector 13%. Grade A space accounted for 42% of total absorption.
Additionally, India witnessed a fresh supply of 47 msf in 2022, of which 34 msf was from tier one cities and close to 13 msf from tier two and three cities.
“The rapidly expanding and highly competitive e-commerce market has fuelled the growth of industrial, logistics and warehousing since the last two years. The industrial & logistics sector is likely to see absorption of 40+ mn sq. ft in 2023,“ said Srinivas N, managing director, Industrial and Logistics, Savills India.
“This demand for space could stem from emerging tier two & three cities, growing demand for urban warehousing and a major transformation in the Indian manufacturing sector backed by Performance Linked Incentives (PLIs) and efficient multi model connectivity plan for local and global distribution. We expect around 50+ mn sq. ft of new supply to be infused in the market during the same period," he added.
The overall industrial and warehousing space stock in tier I cities stood at 300 mn sq. ft at the end of 2022 and is expected to reach 342 mn sq. ft.in 2023. Meanwhile, vacancy levels in tier one cities have decreased from 9.4% in 2021 to 9.0% in 2022 and the yields remain stable across the cities in 2022.
“The shift in consumer patterns propelling new commercial models like quick services in tier 1 cities which has led to an increase in the requirement for Urban Warehousing – in city multi-storied warehousing and similar increase in demand for A-grade warehousing ( multi-user ) facilities in tier 2 and tier 3 cites. The recently launched National Logistic policy, the e-book on warehousing standards, and the development of road infrastructure will be the catalyst of growth," said Deepak Tiwari, COO of KSH Logistics.