With the increasing preference for online shopping, the e-commerce industry is experiencing significant growth. This expansion is directly or indirectly impacting the growth of the warehousing industry. According to a report by Colliers, industrial and warehousing demand has increased by 17% year-on-year (YoY) across the top five cities, with leasing activity reaching approximately 13 million square feet in the first half (H1) of 2024.
Key Cities and Demand Growth
Chennai leads the demand growth with an impressive 88% YoY change from H1 2023 to H1 2024. Following Chennai are Bengaluru with a 21% increase and Delhi with a 14% increase. Third-party logistics (3PL) players remain the primary occupants of warehousing space, contributing to about 36% of overall demand in the first half of the year.
Micro Market Uptake
At the micro market level, significant warehousing space uptake was noted, with more than 1.5 million square feet each in Bhiwandi (Mumbai), Chakan-Talegaon (Pune), and Oragadam (Chennai).
Quarterly Performance
Vijay Ganesh, Managing Director, Industrial and Logistics Services at Colliers India, highlighted that Q2 2024 saw about 6 million square feet of industrial and warehousing demand across the top five cities, a 48% YoY increase. Delhi NCR played a significant role in this growth, with 1.8 million square feet of leasing and a 30% share of the quarterly demand. This demand was driven by large uptakes in the Farukhnagar and Sonipat micro markets.
Sector Dominance and Space Uptake
3PL players dominated the demand with a 36% share. Engineering, FMCG, and electronics segments also had significant space uptake, each holding a 12-16% share. Notably, leasing activity in the engineering and electronics segments increased by over 1.7 times in H1 2024 compared to the same period in 2023.
Future Prospects
Looking ahead, industry-specific policies and a supportive regulatory framework are expected to drive demand for industrial and warehousing space in India. Although the supply of Grade A storage facilities exceeded demand, resulting in a 210 basis point (bps) increase in vacancy levels to 12.2% by the end of H1 2024, developers anticipate increased future demand. This anticipation led to the infusion of 14.4 million square feet of new supply in H1 2024, a 35% YoY increase.
New Developments and Supply
Delhi NCR accounted for about 40% of the new industrial and warehousing developments, with 5.7 million square feet completed in the first half of the year. Q2 2024 saw about 7.5 million square feet of construction completed in the top five cities, representing a 53% YoY increase. This quarter also had the largest quarterly supply infusion in the past two years.
Large Deals and City-Level Insights
Large deals accounted for about 35% of the demand, mainly from 3PL players, with electronics and FMCG occupiers also requiring substantial warehousing space. At the city level, Chennai and Delhi NCR dominated the large-sized deals.
Market Outlook
Vimal Nadar, Senior Director and Head of Research at Colliers India, emphasized that India’s industrial and warehousing market continues to grow, with momentum expected to persist in the second half of the year. The manufacturing PMI has remained in the expansionary zone since July 2021 and has been close to 60 in recent months. Budgetary announcements are anticipated to enhance logistics efficiencies, stimulate demand, and attract investments in the sector. Increasing platform-level investments are expected to bring superior quality industrial and warehousing space in the coming years.