Backed by the sharp rise in demand for warehousing in the e-commerce segment and strong production growth, the year 2021 saw leasing of close to 22 million square feet in industrial facilities and warehousing in the top five cities across the country. According to a report by real estate services firm Colliers, the demand for high-quality warehousing space was steered by 3PL (Third-party logistics) players with a 33 per cent share, followed by e-commerce companies with a 29 per cent share in total leasing.
Geographically, the demand for industrial and warehousing space was led by Delhi-NCR with a market share of 29 per cent followed by Pune and Mumbai at 21 per cent and 20 per cent, respectively. With the NH8 emerging as the preferred cluster, Delhi-NCR recorded a total leasing of 6.5 million sq feet of such spaces in 2021.
The report shows that despite the effects of the COVID-19 pandemic, strong momentum was seen in the leasing market. In addition to the rise in demands for industrial spaces in cities like Chennai, Pune and Delhi NCR, active leasing enquiries in emerging Tier II markets on account of the need for last-mile delivery for customers were also recorded.
Shyam Arumugam, managing director, industrial and logistics services, Colliers India, said, “Supply introduction in most markets are witnessing a strong revival in spite of material price escalation continuing to be a challenge. The Grade A absorption across key cities stood at 22 million sq ft with E-commerce and 3PL sectors once again dominating the space uptake.”
Arumugan added that with the government pushing for the adoption of clean mobility, and the successful rollout of PLI schemes across key manufacturing sectors, the momentum in this space is likely to fuel more demand for space.
In 2021, total Grade A industrial and warehousing supply rose 8 per cent to 24 million sq feet, led by higher building completions in Delhi-NCR and Chennai. The Pan-India Grade A vacancy dropped over six months, standing at 11.5% from 12.2 per cent in June 2021. This was led by lower-than-expected new supply and robust leasing in Grade A properties.
“Occupiers are preferring Grade A properties with good eaves height and compliances. Almost 66 per cent of total leasing was witnessed across Grade A industrial and warehousing facilities indicating increased inclination for high-grade structures. In-city warehousing, smaller fulfilment centres are high in demand in top metro cities as delivery timelines become shorter from same-day delivery to a few minutes’ deliveries for essentials,” said Vimal Nadar, Senior Director, Research, Colliers India.
E-commerce companies leased 6.6 million sq feet of warehousing space during 2021, accounting for a share of 29 per cent. The share was led by the large spaces that e-commerce companies typically take up for their fulfilment centres.
Interestingly, close to 14 per cent of such space off-take demand was from pure-play grocery/food retailing companies, led by higher demand for online grocery across the country. With a focus on 30-minute deliveries in large cities, such companies have been taking up space for in-city warehousing- closer to demand hubs.
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