In H1 2024, India's industrial and warehousing sector saw 13 million sq ft of leasing activity, growing 17% YoY. Chennai and Delhi NCR led demand, driven by Third-Party Logistics (3PL) players, who took 36% of space. Chennai's demand doubled, while Delhi NCR saw significant uptake in Farukhnagar and Sonipat. Engineering, FMCG, and electronics sectors also increased space use. Despite rising supply, vacancy rates grew to 12.2%. The sector added 14.4 million sq ft of new space, with 40% in Delhi NCR. Large deals (over 200,000 sq ft) accounted for 35% of demand, mainly from 3PL, electronics, and FMCG sectors.
The industrial and warehousing sector in India exhibited strong performance in the first half of 2024, with leasing activity reaching approximately 13 million square feet and achieving a 17% year-on-year growth across the top five cities. Chennai and Delhi NCR emerged as the frontrunners, together accounting for nearly half of the total leasing volume during this period.
The Third-Party Logistics (3PL) sector remained the predominant occupant of warehousing space, constituting about 36% of the overall demand in the first half of the year. Notably, Chennai saw a remarkable surge in demand, almost doubling compared to the same period in the previous year. This increase was primarily driven by the warehousing needs of 3PL players. At the micro-market level, significant uptake of warehousing space was recorded, with Bhiwandi (Mumbai), Chakan-Talegaon (Pune), and Oragadam (Chennai) each witnessing more than 1.5 million square feet of space being leased.
On a quarterly basis, the second quarter of 2024 experienced about 6 million square feet of industrial and warehousing demand across the top five cities, marking a 48% year-on-year increase. Delhi NCR was a key contributor, with 1.8 million square feet of leasing and a 30% share of the quarterly demand. The demand in Delhi NCR was primarily driven by substantial uptake in the Farukhnagar and Sonipat micro-markets. Vijay Ganesh, Managing Director of Industrial & Logistics Services at Colliers India, observed that the healthy demand across major cities and supportive government policies have led developers to invest in high-quality warehousing facilities equipped with advanced technology. With substantial completions in the first half of the year, 2024 is expected to see an infusion of 20-25 million square feet of Grade A supply.
In addition to the dominance of 3PL players, sectors such as engineering, FMCG, and electronics also saw significant space uptake, each accounting for 12-16% of the demand. Both the engineering and electronics sectors experienced a notable increase in leasing activity, with more than 1.7 times the activity compared to the first half of 2023. Looking ahead, diverse industry segments are expected to drive the demand for industrial and warehousing space in India, supported by industry-specific policies and a favourable regulatory environment.
Despite the strong demand, the supply of Grade A warehousing spaces outpaced demand, leading to an overall increase in vacancy levels by 210 basis points on an annual basis, reaching 12.2% at the end of the first half of 2024. Developers anticipated higher demand in the upcoming quarters, resulting in a fresh supply of 14.4 million square feet in H1 2024, a 35% year-on-year rise. Delhi NCR led in new developments, accounting for about 40% of the total completions with 5.7 million square feet of new industrial and warehousing spaces. The second quarter of 2024 alone witnessed approximately 7.5 million square feet of completions across the top five cities, marking a 53% year-on-year increase and the highest quarterly supply infusion in the last two years. Amidst this healthy demand and high-quality supply infusion, rentals in key micro-markets experienced a noticeable uptick.
Large deals, defined as those exceeding 200,000 square feet, constituted about 35% of the demand during H1 2024. While a majority of these large deals were driven by 3PL players, significant contributions also came from electronics and FMCG sectors. Chennai and Delhi NCR led in securing these large-sized deals, reinforcing their positions as key markets in the industrial and warehousing sector.
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