CBRE’s India Market Monitor Q3 2023 predicts that the Industrial and Logistics (I&L) leasing sector will see a robust performance, reaching a five-year high of 36-38 million square feet (msf) across the top eight Indian cities in 2023. In the July-September quarter, Chennai led the way with 2.1 msf of absorption, followed by Bangalore and Mumbai at 1.7 msf and 1.3 msf, respectively. These three cities accounted for nearly 62% of the total leasing activity. Notably, third-party logistics (3PL) players were the primary drivers, making up 50% of all leasing activity, followed by electronics and electrical companies (8%) and engineering and manufacturing firms (13%).
Domestic companies took the lead in leasing activities, constituting 59% of the market, followed by corporations from Europe, West Asia, and Africa (25%) and the Asia-Pacific region (12%). The I&L sector witnessed a 12% quarter-on-quarter (QoQ) growth and a remarkable 92% year-over-year increase in warehouse completions during the quarter.
From January to September, the I&L sector experienced a 13% year-on-year growth in leasing. The total absorption across the top eight Indian cities was 27.3 msf, compared to 24.2 msf in 2022. Delhi-NCR, Chennai, and Mumbai collectively accounted for 56% of leasing activity during this period. In the first nine months of the year, 3PL companies held a substantial 45% market share in the leasing sector, followed by engineering and manufacturing (E&M) companies at 15%, and auto and ancillary companies at 7%.
Anshuman Magazine, Chairman and CEO-India, South-East Asia, Middle East, & Africa at CBRE, noted the active participation of larger developers and institutional funds, contributing approximately 40% to completed projects, highlighting the sector’s growth potential. The rising demand for premium, technologically advanced, strategically located assets in select micro-markets may contribute to increasing rents.
According to CBRE data, supply addition in the I&L sector is expected to surpass expectations, reaching 35-37 msf by December, thanks to the completion of previously delayed projects. Supply addition for the first nine months of 2023 reached 28 msf, reflecting a substantial 57% year-on-year growth.
