During the first half of 2023, India's industrial and warehousing sector experienced stable demand, leasing around 11 million sqft across the top five cities. Delhi NCR and Mumbai led the demand with 25.0% and 24.6% shares respectively. Notably, Mumbai witnessed a significant 28% YoY increase, primarily driven by 3PL sector expansion. Despite global economic challenges, rising capital investments, manufacturing output, and supportive government policies fuelled steady growth in the sector.3PL operators accounted for 37% of total leasing, followed by FMCG and Engineering firms.
In the first half of 2023, the industrial and warehousing sector in the top five cities exhibited robust stability, with 11 million square feet of leasing, a figure comparable to the same period last year. Delhi NCR maintained its lead in demand, capturing 25.0% of the market, closely trailed by Mumbai at 24.6%. While most cities experienced marginal single-digit changes in demand, Mumbai stood out with an impressive 28% year-on-year increase in leasing during the first half, mainly fuelled by expansions from players in the 3PL sector.
Despite facing headwinds from the global economy, the industrial and warehousing sector demonstrated resilience, riding on the wave of increased capital investments, surging manufacturing output, and supportive government policies.
The steady trend in leasing was predominantly driven by third-party logistics (3PL) operators, comprising 37% of the total leasing activities in the first half of 2023. Following behind were FMCG and Engineering firms, securing shares of 12% and 11%, respectively.
Amidst the persistent demand for high-quality Grade A warehousing spaces, vacancy levels witnessed a decline of 110 basis points (bps) to reach 10.0% in the first half of the year. Fresh supply amounted to 10.7 million square feet, experiencing a 10% year-on-year dip, as developers cautiously gauged the evolving demand landscape. In the second quarter of the year, the demand slightly moderated, with 4.0 million square feet of leasing. Pune emerged as the demand leader during the quarter, commanding a substantial 26% share.
While 3PL players were instrumental in driving demand during this period, their share in leasing decreased from 53% in the first half of 2022 to 37% this year. In contrast, FMCG players witnessed an impressive three-fold surge in leasing activities as they expanded their presence in key markets like Delhi NCR and Mumbai.
Large deals, defined as leasing deals exceeding 100,000 square feet, constituted approximately 75% of the total demand during H1 2023. Among these significant transactions, 3PL companies held the lion's share, followed by FMCG and Engineering players. Mumbai and Pune emerged as the dominant hubs for such large-sized deals among the top five cities.
The industrial and warehousing sector's steady growth trajectory during H1 2023 paints a promising picture, as the market adapts to changing dynamics and continues to attract diverse players seeking to capitalize on the sector's potential.
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