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Pune and Mumbai dominated leasing in YTD 2023 with about 46% share.
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3PL players continued to dominate leasing with a 40% share; leasing by FMCG players rose over two-fold.
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Vacancy levels dropped around 100 bps YoY amidst stable demand.
Gurgaon, 20 October 2023: With 17 million square feet of gross leasing in the first three quarters of 2023, industrial and warehousing demand across the top five cities is almost comparable to the corresponding period in 2022. Despite a relatively slower growth during H1 2023, leasing activity picked up in Q3 2023, registering a 55% QoQ growth. Pune led the demand during the nine-month period with a 24% share, closely followed by Mumbai at 23%, both edging ahead of the usual frontrunner, Delhi NCR. Overall, Bhiwandi remained the most active micro-market in Mumbai, while Chakan-Talegaon continued to be the preferred market for industrial occupiers in Pune. Third-party logistics players (3PLs) continued to be the top occupiers of warehousing space, contributing to about 40% of total warehousing demand to date. 3PL space uptake was driven by healthy activity in Mumbai and Chennai, particularly.
Chennai-led leasing activity during the third quarter of 2023
The economic activity of Chennai has always been driven by a diverse range of sectors, starting from automobile and electronics hardware to textiles, the media industry, and software services. Few of these sectors played a critical role in the strong warehousing demand in Q3 2023. Interestingly, for the first time in the last few quarters, Chennai led leasing activity during the third quarter of 2023, with about 30% share amongst the top five cities. Within Chennai, NH-16 and NH-48 micro-markets saw demand driven largely by occupiers from the 3PL and engineering sectors and the electronics sector to a certain extent.
Trends in Grade A Gross Absorption (mn sq ft)
| City | Q3 2022 | Q3 2023 | YoY change | YTD 2022 | YTD 2023 | YoY change |
| Bengaluru | 0.9 | 0.7 | -21% | 2.3 | 2.0 | -10% |
| Chennai | 0.5 | 1.8 | 261% | 2.2 | 3.5 | 60% |
| Delhi NCR | 3.8 | 0.9 | -76% | 6.8 | 3.7 | -46% |
| Mumbai | 0.5 | 1.2 | 128% | 2.7 | 3.9 | 48% |
| Pune | 1.3 | 1.6 | 22% | 4.0 | 4.1 | 1% |
| TOTAL | 7.0 | 6.2 | -12% | 18.0 | 17.2 | -4% |
Source: Colliers
Note- YTD: 1st January to 30th September of the year
Data pertains to Grade A buildings
Trends in Grade A Supply (mn sq ft)
| City | Q3 2022 | Q3 2023 | YoY change | YTD 2022 | YTD 2023 | YoY change |
| Bengaluru | 0.6 | 0.8 | 32% | 1.8 | 1.8 | 4% |
| Chennai | 0.0 | 1.8 | 7181% | 2.2 | 3.8 | 70% |
| Delhi NCR | 0.8 | 1.2 | 49% | 5.9 | 4.9 | -16% |
| Mumbai | 0.6 | 0.8 | 27% | 2.5 | 2.4 | -1% |
| Pune | 1.2 | 1.4 | 20% | 2.7 | 3.8 | 36% |
| TOTAL | 3.2 | 6.0 | 86% | 15.1 | 16.7 | 11% |
Source: Colliers
Note- YTD: 1st January to 30th September of the year
Data pertains to Grade A buildings
“In addition to demand driven by 3PL and retail segments, there is a surge in demand from manufacturing players led by FMCG companies, electronics, auto & auto ancillary, EV, and semiconductor companies. FMCG companies accounted for about 1.5 million square feet of industrial and warehousing space during the first three quarters of 2023, a twofold rise compared to the same period last year. The trend is set to continue owing to support from the government for the manufacturing sector, led by initiatives like PLI (Production-Linked Incentive) and Make in India,” says Vijay Ganesh, Managing Director, Industrial & Logistics Services, Colliers India.
Leasing by FMCG players surged over twofold during YTD 2023.
3PL players continued to dominate demand during the January–September period, at 40% share, followed by engineering players at 17%. At the same time, leasing by FMCG players experienced an impressive over-two-fold rise as they expanded their presence in key markets such as Delhi, NCR, and Pune. The rise in leasing levels for the FMCG sector largely pertains to a spurt in consumption levels over the last two quarters, which is likely to continue in the last quarter as well, led by the upcoming holiday season.
Large deals account for 72% of the total leasing.
During YTD 2023, large deals (>100,000 sq ft) accounted for about 72% of the demand. Among these larger deals, 3PL companies continued to account for the bulk of the share, followed by FMCG and automobile players. Mumbai, followed by Chennai, dominated the chunk of large-sized deals across the top five cities.
“Despite global economic headwinds, India’s industrial and warehousing sector remains resilient, closely following the trendline of 2022. Leasing momentum is expected to continue in the final quarter of the year, led by 3PL, engineering, and FMCG players, and is likely to close in the range of 22–25 mn sq ft. The demand outlook from 3PL players remains positive in the medium term, and the sector will continue to dominate warehousing activity in the next few quarters. Going ahead, key government policies and infrastructure developments, including multimodal logistics parks, the Gati Shakti programme, the national logistics policy, and clarity with respect to the DESH Bill, will be instrumental in institutionalising the sector, while opportunities galore for investors and developers.” says Vimal Nadar, Senior Director & Head of Research, Colliers India.
Led by consistent leasing activity and improved developer confidence, the January–September 2023 period saw fresh supply of 16.7 million sq ft, a 11% rise YoY. Amidst favourable demand-supply dynamics, vacancy levels during the first half of the year dropped by around 100 basis points (bps) to 9.4%. During the third quarter, new supply jumped 86% YoY. Chennai saw a significant influx of new supply, led by the NH-16 micro-market.
Trends in Grade A Vacancy rate (%)
| City | Q3 2022 | Q3 2023 |
| Delhi NCR | 7.5% | 6.4% |
| Mumbai | 5.0% | 8.7% |
| Bengaluru | 14.5% | 10.4% |
| Chennai | 11.3% | 12.3% |
| Pune | 7.9% | 6.2% |
| Pan India | 10.4% | 9.4% |
Source: Colliers
Note- YTD: 1st January to 30th September of the year
Data pertains to Grade A buildings
Tech and sustainability will be the focus areas in the future.
In the next few years, led by changing occupier preferences, there will be an increased focus on sustainable warehousing spaces, green-certified warehousing, and integrated logistic parks by developers. Tech-driven investments into warehouse management systems, inventory tracking, and fleet management systems are likely to play a far more prominent role in shaping the sector ahead, while institutional players continue to gain ground.
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