Demand remains strong for industrial, warehousing space
Demand remains strong for industrial, warehousing space
Mumbai: Activity in Grade A industrial and warehousing facilities continues to be resilient, with gross absorption during H1 2022 in the top 5 cities at 10.8 million sq feet, a 7 per cent increase YoY. Delhi-NCR accounted for the highest activity at 28 per centshare, followed by Pune with 24 per cent share in demand.
However, on the supply side, vacancy declined by 24 per cent YoY to 11.8 million sq feet in H1. Developers postponed fresh supply in light of high input costs and are completing projects after seeking pre-commitments from occupiers.
Talking to Bizz Buzz, Vimal Nadar, Head of Research, Colliers India says, "The industrial and warehousing space continues to be resilient as domestic demand remains strong. We are seeing steady demand from third-party logistics players who have been leasing large spaces above 1 lakh sq feet, apart from engineering and automobile sectors. Overall, the industry is moving towards institutionalization as developers and PE players join hands to create platforms and develop world-class industrial and warehousing assets."
About 55 per cent of the gross absorption was led by third-party logistics players, followed by the engineering and automobile sectors with a share of 12 per cent each.
"The first half of this year has seen several large deals with average deal size up 27 per cent YoY. Grade A supply in preferred micro markets across key markets in India continues to remain muted owing to construction slowdown on account of raise in construction costs. This has led to short-term rent increases. Third-Party Logistics players continue to dominate demand in the first half of this year and the trend is expected to continue in the next few quarters as well. We are also witnessing more Tier II city enquiries as key players are strengthening their last-mile delivery supply chain to be proximate to customers," said Shyam Arumugam, Managing Director, Industrial and Logistics Services, Colliers India.
Overall, grade A supply declined 24 per cent YoY across the top five cities to about 11.8 million sq feet in the first half of 2022. Despite low supply and steady leasing, vacancy level rose during the quarter. Grade A vacancy levels rose to 11.1 per cent at the end of Q2 2022, from 9.8 per cent in Q12022 (January-March 2022). This was largely led by strong leasing activity in Delhi-NCR, Chennai, and Pune. The rise in vacancy was led by Delhi-NCR wherein vacancy levels saw an increase during the quarter.
However, Delhi-NCR dominated leasing activity in the first half of 2022 with a share of 28 per cent. This demand was led by large deals that accounted for about 77 per cent of the total leasing. Deals by third-party logistics players led most of the activity through large deals. Pune accounted for 24 per cent of the leasing in H1 2022. Automobile sector continued to lead the demand with a notable share of 40 per cent in total leasing of the city, followed by third-party logistics sector at 27 per cent share. Deals above 100,000 sq feet accounted for 75 per cent of the total leasing. This was led by larger deals by third-party logistics players and fast-moving consumer goods (FMCG) companies.