Demand for industrial and warehousing increased by 9% from January to September: Colliers

According to a Colliers report, demand for industrial and warehousing space increased by 9% year over year, totaling 17.5 million square feet (mn sq ft) of gross absorption between January and September in India's top five cities.

At 6.7 million square feet, the third quarter of this year saw the highest level of demand since the first quarter of 2021. By far the largest users of storage space today, third-party logistics providers (3PLs) account for more than half of all warehousing demand.

Improved consumer confidence in the retail sector during the holiday season and increased online spending continue to support warehouse expansion and are anticipated to increase short-term demand.

Pune came in second place with a 21 percent market share, supported by a strong demand from 3PL players, engineering firms, and online retailers. Delhi-NCR had the highest demand throughout the year. The most active micromarkets in Delhi-NCR continued to be Tauru Road and Luhari, while Chakan-Talegaon in Pune continued to draw industrial occupiers, according to the report.

"Continued lease activity is anticipated in the warehousing category with a number of retail clients actively negotiating to strengthen their position in sizable mega distribution centres. In terms of the macro environment, the prime minister's announcement of the National Logistics Policy is one of the significant turning points for this industry and is anticipated to have a very beneficial long-term effect on the logistics sector. As e-commerce and 3PL businesses plan significant expansion to increase efficiency, large deals will continue to dominate the warehousing market, according to Shyam Arumugam, Managing Director, Industrial & Logistics Services, Colliers India.

Since developers continued to be cost-conscious while waiting for input prices to further decline, new supply has deteriorated during this year, falling 20 percent to 15 million square feet, delaying project completions. Industrial and warehouse facility vacancy levels decreased overall by 0.7 percentage points during the third quarter due to a moderate supply and strong demand. Due to a combination of high demand and a dearth of high-quality supply, rents in key cities are expected to increase over the next quarters.

"With the rapid expansion of 3PL logistics, India's warehousing industry is starting to pick up speed. Players in the 3PL supplied 50% of the year's total demand for warehouse space, with deals averaging 1.1 lakh square feet. Large agreements accounted for over 75% of 3PL logistics' leasing, according to Vimal Nadar, Senior Director at Colliers India.