Delhi-NCR Among Top 10 APAC Logistics Markets

Delhi- NCR has made a mark by occupying a coveted place among the top 10 APAC logistics markets, with a yearly rental growth of 3 percent, surpassing APAC’s average year-on-year rental growth.

According to Knight Frank’s latest H1 2024 report,  the Asia-Pacific (APAC) logistics market saw rental growth of 2.4 percent in year-over-year (YoY) terms marking a significant slowdown from the 6.2 percent increase observed in H1 2023. The study, however, noted that Delhi – NCR (3.0 percent ) recorded rental growth higher than the regional average, while Mumbai (2.3 percent) and Bengaluru (2.3 percent ) were marginally below the regional growth figure. Further, all three India markets noted a stable rental outlook for the next six months owing to the continued demand for warehousing and logistics spaces across the country.

Despite 13 of 17 tracked cities seeing rent increases in H1 2024, overall rental growth slowed due to challenging conditions in the Chinese Mainland, especially in Beijing and Shanghai. business activity decline led to a 13.5 percent drop in rents and vacancy rates exceeding 20 percent, prompting landlords to cut rents and offer shorter leases. In contrast, Singapore saw logistics rents grow 6.7 percent in six months and 10.8 percent YoY, driven by strong manufacturing and 10 consecutive months of PMI expansion. Forecasts predict a further 3 percent to 5 percent rise in prime logistics rents for 2024.

Since the pandemic, the Indian warehousing market rents have experienced significant growth, driven by a surge in occupier demand that reached record highs through FY 2023. Although occupier activity has since slowed, rent growth in Bengaluru, Mumbai, and NCR continued in H1 2024, maintaining levels seen at the end of H1 2023. However, elevated vacancy levels in NCR and Bengaluru, resulting from speculative development, could potentially dampen the rent growth in these areas. Nevertheless, the combination of high development costs and strong demand from the manufacturing and 3PL sectors is expected to sustain rent levels for the remainder of 2024.

Delhi-NCR is positioned 8^th in the APAC logistics market based on annual rental growth. At INR 20.80/ sq ft/ month, the city’s rents grew at 3.0 percent YoY. The vacancy level in the market now stands at 15.7 percent.

Mumbai is on 11^th position in the APAC logistics market in terms of annual rental growth. With a YoY growth of 2.3 percent, the city’s rents now stand at INR 23.60 / sq ft/ month. The vacancy level has also dropped to 9.4 percent in H1 2024 from 10.3% in the previous year.

Bengaluru drops six places down and ranks 12^th in the APAC logistics market based on annual rental growth in H1 2024. Rents in the city grew at 2.3 percent YoY to INR 22.00 /sq ft/ month. The vacancy level stood at 21.1 percent in H1 2024.

APAC PRIME LOGISTIC RENTAL GROWTH IN H1 2024 and OUTLOOK

Source: Knight Frank Research

Warehouse transactions across eight primary markets in India reached 23 million square feet (mn sq ft) H1 2024 (January – June 2024), with 55 percent of these transactions occurring in Grade A spaces during this period. Transaction activities were well distributed across markets.  Mumbai accounted for 20 percent of the total warehousing volume, driven primarily by the 3PL sector. NCR was the second most prolific market, representing 17 percent of the total warehousing area transacted amongst the top eight Indian cities during the period, with 3PL and manufacturing sectors driving volumes.  In H1 2024, the volume of transactions by manufacturing sector companies has surpassed that of the 3PL sector. This is notable as the 3PL sector has historically been the mainstay of the Indian warehousing market. Companies from the manufacturing sector, including those in automotive, energy, and chemicals, accounted for a significant 36 percent of the total transaction volume during this period. 

 According to Shishir Baijal, Chairman & Managing Director, Knight Frank India, the government’s successful focus on the manufacturing sector is resulting in healthy demand from this sector. Along with the traditional anchor role of 3PL players, this has strengthened overall market volumes. Strong private equity inflows into the warehousing market are expected to continue benefiting the logistics environment by ensuring the availability of high-quality facilities and the adoption of the latest processes in the Indian warehousing landscape. The robust business environment, diversified warehousing demand, and growing institutional interest are likely to help the market regain its momentum in the near to medium term.

 “Although conditions in Beijing and Shanghai are sharply in contrast with the rest of the region, still, it remains clear that logistics occupier markets are on the whole transitioning to a more neutral state from one favouring landlord. However, despite moderating demand, the long-term fundamentals supporting the region’s logistics space market remain intact. As supply chains shift, manufacturing is emerging to be an important sector driving logistics development, along with e-commerce and 3PL players. While there will be ample flight-to-quality options in Beijing and Shanghai, these markets will remain under pressure until adsorption capacity picks”, adds Christine Li, Head of Research, Asia-Pacific, Knight Frank.