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Industrial and warehousing demand across the top 5 cities remained strong during Q1 2023, rising by 11% YoY at 7.2 mn sq ft. The quarter also saw the highest leasing compared to the previous 8 quarters. This sustained streak in leasing was backed by 3PL operators who continued to expand across large markets, forming 41% of total leasing during the quarter. This was distantly followed by the FMCG sector at 12%. Interestingly, demand from Retail and FMCG sectors saw a three-fold rise YoY, as they expanded their footprints in larger markets such as Delhi-NCR and Mumbai. This pick-up in the take up of industrial warehousing space pairs well with the growth in private consumption in the domestic economy.

Delhi-NCR led the demand during the first quarter accounting for 29% share in total leasing, followed by Mumbai at 25%. Mumbai saw 37% YoY rise in leasing, led by 3PL operators who continued their expansion spree in the city despite weaker economic & business sentiment. Tauru road and NH 48 in Delhi NCR and Bhiwandi in Mumbai remained attractive markets during the quarter.

“3PL operators are targeting larger dense markets with good-quality infrastructure for expansion to ensure quick delivery of online orders. It contributed to more than 2/3^rd of the total leasing in Mumbai, led by select large deals. Average deal size by 3PL operators in the city  was more than 2 lakh sq feet, 69% higher than pan India average. 3PL operators will continue to eye larger markets as they look to augment their distribution network.” says Vimal Nadar, Senior Director, and Head of Research, Colliers India.

Trends in Grade A Gross absorption (mn sq ft)

While industrial and warehousing demand remained sturdy during Q1 2023, new supply across top 5 cities was limited. Supply across top 5 cities declined 8% YoY, at 5.8 mn sq ft, as developers remained watchful on the evolving demand scenario. Higher raw material prices and increased logistics costs also impacted new project completions across major markets. Over the next few quarters, developers will continue to remain cautious and are likely to bring in supply to meet market demand, keeping market fundamentals intact.

Owing to limited available supply and robust demand, vacancy levels across top 5 cities dropped by 170 basis points YoY during Q1 2023 to 8.1%. Majority of the markets except Delhi-NCR saw single digit vacancy levels, backed by steady demand from 3PL, FMCG & engineering companies. With demand being upbeat amidst limited supply, rentals across top micro-markets saw an annual rise. Chakan in Pune, and Bhiwandi in Mumbai were some of the key micro markets which saw an uptick in rentals by 14% and 6% respectively.  

“Over the last 7-8 quarters, demand in Pune has largely outpaced supply, with vacancy dropping significantly to 6.3% during Q1 2023. Demand from automobile & engineering sectors remains unabated & continues to account for at least 50% on an average. Riding high on this strong demand, multiple large scale warehousing parks have been planned in the Chakan-Talegaon region. This is expected to provide occupiers quality warehousing space options in next 2-3 years, thus aiding growth. Influx of superior quality warehousing spaces coupled with robust demand from occupiers will push rentals upward & keep the overall market active.” says Animesh Tripathi, Managing Director, Pune and Mid-India Industrial and logistics services, Colliers India.

Trends in Grade A Supply (mn sq ft)

Trends in Grade A Vacancy rate (%)

During Q1 2023, large deals (>100,000 sq ft) accounted for about 80% of the demand. Amongst larger deals, 3PL companies accounted for the highest share, followed by FMCG & engineering companies. While Delhi NCR saw the highest leasing overall, Mumbai accounted for the highest share in large-sized deals, followed by Pune. Also, more than 80% of deals in FMCG and Electronics were large-sized deals. Prominent retailers and FMCG players are undertaking large scale expansions, led by rising consumption in metro cities.

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