Delhi-NCR Drives Industrial & WareHousing Real Estate

Driven by a big rise in large deals, Delhi-NCR dominates the leasing activity in the industrial and warehousing segment  across top five cities in the country.

The 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% increase YoY.  According to a Colliers report, Delhi-NCR accounted for the highest activity at 28% share, followed by Pune with 24% share in demand. However, on the supply side, vacancy declined by 24% YoY to 11.8 million sq feet in H1 2022. Developers postponed fresh supply in light of high input costs and are completing projects after seeking pre-commitments from occupiers.About 55% of the gross absorption was led by third-party logistics players, followed by the engineering and automobile sectors with a share of 12% each.

Trends in Grade A Gross absorption

Trends in Grade A Supply

Source: Colliers

“The first half of this year has seen several large deals with average deal size up 27% YoY. Grade A supply in preferred micro markets across key markets in India continues to remain muted owing to construction slowdown on account of increase 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.  Tier II city enquiries are on the rise as key players are strengthening their last-mile delivery supply chain to reach to customers,” according to Shyam Arumugam, Managing Director, Industrial and Logistics Services, Colliers India.

Overall, grade A supply declined 24% 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% at the end of Q2 2022, from 9.8% in Q1 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%. This demand was led by large deals that accounted for about 77% of the total leasing. Transactions by third-party logistics players led most of the activity through large deals. Majority of the activity was in the Tauru Road location. Pune accounted for 24% of the leasing in H1 2022. Automobile sector continued to lead the demand with a notable share of 40% in total leasing of the city, followed by third-party logistics sector at 27% share.

Large deals above 100,000 sq feet accounted for 75% of the total leasing. This was led by  third-party logistics players and fast-moving consumer goods (FMCG) companies.According to Vimal Nadar, Senior Director and Head of Research, Colliers India, occupiers, especially third-party logistics players and e-commerce players are increasingly taking up larger integrated warehousing space. On the supply side, industrial and warehousing segment may see some limitations over the next few quarters as developers face supply chain constraints and rising input cost materials.