Leasing activity was led by Delhi-NCR, Mumbai, and Chennai, accounting for a collective 60% share in total leasing during January-June. Notably, all cities, except Bengaluru, exhibited a discernible upswing in I&L leasing as compared to the same period in the previous year.
The report suggests that festival season sales are likely to contribute to sustained leasing activity during July-December.
The supply side also witnessed impressive growth, recording a substantial 78% YoY increase, culminating at 17.7 million sq. ft. during Jan-Jun. This surge was attributed to the culmination of pent-up supply in select cities. Key contributors to this growth were Chennai, Kolkata, and Mumbai, collectively accounting for more than half of the total project completions.
Major developers, backed by institutional funds, played a crucial role in this supply surge, contributing approximately 39% to the overall supply during the same period. Project completions were predominantly observed in Delhi-NCR, followed by Chennai and Hyderabad, collectively representing over two-thirds of project finalizations.
The report also underscored the dominance of third-party logistics (3PL) players in leasing activity, capturing a substantial 43% share during Jan-Jun. This trend was attributed to the outsourcing of supply chain processes by e-commerce, retail, and manufacturing entities to 3PL firms, enabling them to optimize storage needs, enhance flexibility, and curtail operational costs.
E-commerce and retail sectors collectively accounted for a 9% share each in leasing activity, while other sectors such as auto & ancillary (7%), FMCG (6%), and electronics and electricals (5%) also contributed to the overall leasing landscape.
The leasing market witnessed a preference for small-sized transactions (<50,000 sq. ft.), constituting 44% of the Jan-Jun ‘23 activity. Medium-sized transactions (50,000 – 100,000 sq. ft.) and large-sized deals (over 100,000 sq. ft.) constituted about 24% and 32% of the activity, respectively. Notably, Delhi-NCR, Mumbai, and Chennai emerged as leaders in large-sized deal closures, accounting for an impressive 65% of such deals. These deals were primarily driven by 3PL players, followed by engineering & manufacturing and retail firms, collectively contributing to around 70% of large-sized deal closures.
Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE, said, “The second half of the year foresees a consistent influx of leasing activities, paving the way for an estimated 32-36 million sq. ft. uptake of Industrial and Logistics (I&L) space in 2023. This growth trajectory will be predominantly propelled by the Third-Party Logistics (3PL) sector as they continue to implement a ‘multipolar’ supply chain strategy. The space take-up by engineering & manufacturing firms is also expected to remain strong led by the persistent endeavors of the government to enrich the investment landscape, attracting both global and domestic manufacturers to establish operations within India.”
Ram Chandnani, Managing Director, Advisory & Transactions Services, CBRE India, said, “Driven by the completion of pent-up projects in the first half of 2023, the supply addition is projected to reach approximately 26-30 million sq. ft. by year-end, a significant increase from the 21 million sq. ft. completed in 2022. Furthermore, we anticipate that larger developers supported by institutional funds will continue to play a more prominent role in project completions, with their share expected to touch about 40% in 2023 compared to 33% in 2022. Additionally, in response to the growing demand in tier-II cities, developers are likely to explore investment opportunities in these emerging logistics nodes by acquiring land banks in proximity to new infrastructure initiatives.”
The report underscores the robust growth trajectory of India’s Industrial & Logistics sector, driven by factors such as increased 3PL involvement, supply chain optimization, and rising consumer demand across various sectors. The report anticipates sustained momentum in the leasing activity throughout the year, further bolstering the nation’s real estate landscape.
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Updated: 08 Aug 2023, 01:50 PM IST