Leasing of industrial and warehouse spaces in India's premier cities declined by 12% in Q3 2023, with a total of 6.2 million square feet leased, as per a Colliers report. While Pune dominated with a 24% share, Mumbai closely followed at 23%. Third-party logistics firms (3PLs) maintained their lead in the sector, contributing to 40% of the warehousing demand, followed by FMCG and automobiles. In terms of these substantial deals, Mumbai stood first, followed by Chennai. Despite the current dip, experts anticipate a resurgence in leasing activity in the final quarter of 2023.
Leasing activity for industrial and warehouse spaces across India's prime cities recorded a drop in the third quarter of 2023. A recent study by Colliers reveals that leasing in the top five cities from January to September 2023 reached 17 million square feet (msf), marking a 4% decline compared to the previous year.
Q3 2023 witnessed a leasing volume of 6.2 msf, reflecting a 12% decrease from the 7 msf observed in the same quarter in 2022. Of the cities, Pune emerged as the prime destination, securing a 24% share of the leasing activity, closely followed by Mumbai with a 23% share.
The report underscored the continued prominence of third-party logistics firms (3PLs) in the warehousing landscape. A 3PL (third-party logistics) provider offers outsourced logistics services, which encompass anything that involves management of one or more facets of procurement and fulfillment activities. Contributing to nearly 40% of the warehousing demand, 3PLs displayed a robust presence, especially in cities like Mumbai and Chennai.
Simultaneously, Fast Moving Consumer Goods (FMCG) enterprises displayed an assertive expansion strategy, with leasing activities escalating more than twofold, notably in regions like Delhi-NCR and Pune.
Large-scale transactions, involving spaces exceeding 100,000 sq ft, constituted about 72% of the 2023 demand up to this point. Among these transactions, 3PL entities remained the chief participants, followed by FMCG and automotive industries. In terms of these substantial deals, Mumbai stood at the forefront, with Chennai following suit.
Highlighting Q3's city-wise leasing performance, Chennai took the lead, contributing to nearly 30% of the total leasing activities among the top cities. Focal areas within Chennai, like NH-16 and NH-48, experienced heightened demand, predominantly from 3PL, engineering, and to some degree, electronics sectors.
The report also highlighted that the first half of 2023 saw a reduction of approximately 100 basis points, bringing the rate down to 9.4%. Moreover, the third quarter marked an impressive 86% year-on-year increase in new supply. In particular, the NH-16 region in Chennai observed a notable surge in this new supply.
In conclusion, the industrial and warehouse leasing landscape in India's leading cities exhibited mixed trends in 2023. While the overall leasing activity experienced a dip, certain sectors like 3PL and FMCG showed promising growth. As the year progresses, experts remain optimistic about a rebound in the final quarter.
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