The rising demand for high quality industrial and warehousing space, driven by Delhi- NCR paints a promising picture for this alternate asset class of real estate in 2022 Team Torbit
The year 2021 saw leasing of about 22 million sq feet across warehousing and industrial facilities in the top 5 cities, steered by robust warehousing demand from the E-commerce segment and strong production growth. Demand for high-quality warehousing space was steered by 3PL (Third party logistics) players with a 33% share, followed by e-commerce companies with a share of 29% in total leasing.
According to Colliers, Delhi-NCR continues to lead industrial and warehousing demand with a share of 29%, followed by Pune and Mumbai at 21% and 20% each respectively. Majority of the space off take was for warehouses, followed by industrial sheds.
Last year robust leasing momentum was witnessed despite the evolving Covid-19 situation. Supply in most markets is witnessing a strong revival despite material price escalation continuing to be a challenge. The Grade A absorption across key cities stood at 22 million sft with E-commerce and 3PL sectors once again dominating the space uptake. The industrial demand is picking up across cities such as Chennai, Pune and Delhi-NCR. There are active leasing enquiries in emerging Tier II markets on account of need for last mile delivery for customers,
Given the government’s push for adoption of clean mobility and successful roll out of PLI schemes across key manufacturing sectors, big momentum is anticipated which shall contribute to demand for industrial space. In the year 2022, we would continue to see robust leasing, provided committed deliveries of space happen on time from developers.
Supply (In mn sq ft)
| City | H1 2021 | H2 2021 | % Change (half yearly) |
| Bengaluru | 0.7 | 0.7 | 3% |
| Chennai | 1.7 | 2.5 | 50% |
| Delhi NCR | 9.5 | 2.4 | -75% |
| Mumbai | 2.3 | 1.8 | -20% |
| Pune | 0.9 | 1.4 | 56% |
| TOTAL | 15.1 | 8.8 | -41% |
Gross Absorption (In mn sq ft)
| City | H1 2021 | H2 2021 | % Change (half yearly) |
| Bengaluru | 2.0 | 1.1 | -45% |
| Chennai | 1.7 | 1.8 | 10% |
| Delhi NCR | 3.0 | 3.5 | 16% |
| Mumbai | 0.7 | 3.9 | 444% |
| Pune | 2.4 | 2.2 | -7% |
| TOTAL | 9.8 | 12.5 | 28% |
Colliers
In Delhi- NCR and Chennai, total Grade A industrial and warehousing supply during the year rose 8% to 24 million sq feet, led by higher building completions. Pan-India Grade A vacancy dropped over six months, standing at 11.5% from 12.2% in June 2021. This was led by lower-than expected new supply, and robust leasing in Grade A properties.
About 66% of the total leasing was witnessed across Grade A industrial and warehousing facilities, indicating increased inclination for high-grade structures. Going by the prevailing trend, in-city warehousing and smaller fulfillment centers will continue to be in high demand in top metro cities as delivery timelines become shorter from same-day delivery to a few minutes.
E-commerce is witnessing robust demand share. E-Commerce companies leased 6.6 million sq feet of warehousing space during 2021, accounting for 29% share. The share was led by the large spaces that e-commerce companies typically take up for their fulfilment centers. For instance, during 2021, the average deal size of an e-commerce company was the highest, followed by 3PLs. The companies are taking up space for in-city warehousing- closer to demand hubs as they focus on 30-minutes deliveries in large cities.
Delhi-NCR continues to be the market leader in industrial demand., with leasing of 6.5 million sq feet during 2021. Large deals in the city were led by a combination of spaces leased by 3PL players and e-commerce companies. In NCR, NH8 cluster was the most preferred cluster for industrial space. Pune came in second in terms of leasing and accounted for 21% of the pan-India leasing.
Looking at the current market dynamics, Delhi-NCR will continue to dominate the warehousing and industrial real estate market.
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