Leasing in Grade A Industrial and warehousing spaces touched 10.1 million sq ft in H1 2021, cross the top five Indian cities of Bengaluru, Chennai, Delhi NCR, Mumbai and Pune. The demand was primarily driven by 3PL companies, followed by E-commerce firms, which accounted for almost 31% and 22% of the total demand respectively. Delhi NCR led the leasing activity with a share of about 30.2%, followed by Pune and Bengaluru with a share of 27.2% and 20.0% respectively. Almost 59% of the total leasing was in Grade A industrial and warehousing facilities indicating increased inclination for high-grade structures. The average length of warehousing leases is also getting longer, ranging from 6-9 years and even longer in some cases.
“Demand for industrial and warehousing space will not only come from e-commerce, 3PLs, but also from medical suppliers, exporters and cold storage operators. With same-day delivery becoming the norm, there will be significant activity in smaller facilities closer to cities, needed for last-mile delivery. The market will also see sizeable repurposing of defunct spaces into Grade A industrial spaces. We expect demand from 3PL and E-commerce firms to remain resilient in the coming quarters, boosting demand for consolidated warehouses with upgraded technology solutions like Warehouse Management systems,” said Ramesh Nair, Chief Executive Officer, India & Managing Director, Market Development, Asia.
On the supply front, the market witnessed 15.1 million sq feet of new building completions during H1 2021, a two-fold increase from H1 2020. Developers are racing to finish building completions to capture the burgenoning demand for industrial and warehousing space. Delhi NCR accounted for almost 63% of the new supply delivered in H1 2021, followed by Mumbai and Chennai accounting for 15% and 11% of the pie respectively.
Overall vacancy rate was at just over 12% with both Bengaluru and Chennai having the lowest vacancy rate of 6.3% with Pune and Delhi NCR having the highest at 17.9% and 17.4% respectively. All the cities saw an uptick in rentals in H1 2021 from those of last year. Bengaluru saw the steepest rise of about 19% as demand outpaced supply.
“The behavioral shift of consumers from offline to online shopping is contributing to increased demand across the spectrum of industrial and logistics property. Third-Party Logistics players coupled with E-commerce companies remain the major demand drivers of warehousing space in H1,2021 (more than 50% of the demand in the top 5 cities). On the supply side, we have seen a robust supply addition of more than 15 million sq ft added across markets. However, material price increase /fluctuations (especially of steel) have put a strain on the speedy development plans of developers. We anticipate further growth of warehousing demand as we head into the festive season and expect demand to remain upbeat through H2 2021”, said Shyam Arumugam, managing Director, Industrial & Logistics Services (India).
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