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Industrial and warehousing space absorption stood at 44 mn sq. ft in 2021, which includes 35.1 mn sq. ft from Tier I cities and 8.6 mn sq. ft from Tier II and Tier III cities, said Savills India in a report.
Despite COVID-19 curbs impacting construction activities, India witnessed a fresh supply of 45 mn sq. ft. in 2021 where 36 mn sq. ft was from Tier I cities and 8.9 mn sq. ft from Tier II and Tier III cities, the report added.
Similar to 2020, 3PL (Third-Party Logistics) and e-commerce sectors continued to drive warehousing demand accounting 62% of the total absorption in 2021, followed by manufacturing sector at 14%.
The market is likely to see absorption in excess of 40 mn sq.ft (including Tier I, II and III cities) in 2022. On the supply side, Savills India expects over 45 mn sq. ft during the same period.
Among the major cities in India, Delhi NCR led with the highest absorption in 2021 at 18%, followed by Pune at 15%. Mumbai and Bengaluru saw absorptions at 14% and 11%, respectively, while tier II and tier III cities accounted for 20%.
In addition, the Tier II and Tier III cities such as Rajpura, Lucknow, Coimbatore, Jaipur, Guwahati, Bhubaneswar, Nagpur, Kochi/Ernakulam, Indore, Hosur, and Patna witnessed around 8.6 mn sq. ft of absorption in 2021.
These cities are poised to gain further momentum in 2022 and 2023 with e-commerce and 3PL firms capitalizing on consumption-driven growth and pushing the demand for warehousing space, the report said.
The overall industrial and warehousing space stock in Tier I cities is at 266 mn sq. ft at end of 2021 and is expected to reach 304 mn sq. ft. in 2022 and 345 mn sq. ft. in 2023, according to the report. Meanwhile, vacancy levels in Tier I cities have increased from 8.4% in 2020 to 9.4% in 2021 and rental values remained stable in 2021 across the major cities with new projects delivered with improved specifications and of high quality environmental, health & safety (EHS) standards.
The market witnessed 4,200 plus acres of manufacturing and warehousing land transactions across Tier I and Tier II cities, of which 51% was private land and 49% was government land.
The report highlights that the industrial and logistics sector witnessed investments exceeding $1.5 billion in 2021 making the sector the highest after the office sector to attract such investments. The market is likely to witness continued and growing interest from investors in this asset class in 2022 as well.
“Work-from-home and social distancing norms have further fuelled the e-commerce demand and therefore growth of the Indian logistics and warehousing sector. Rising popularity of quick commerce companies and e-commerce companies focusing on improving the delivery time and customer experience will result into rapid growth of urban warehousing.
"Recent reforms announced by the government in tightening import regulations, subsidies in terms of Performance Linked Incentives (PLIs) to attract foreign capital and companies mulling over China-Plus-one strategy triggered due to Covid-19 outbreak have resulted into a major transformation in the Indian manufacturing sector,” said Srinivas N, managing director, Industrial and Logistics, Savills India.
“Besides, strong macro-economic fundamentals, government initiatives favouring infrastructure development in transport, water, power and communications and support to the growing sectors are likely to drive manufacturing and warehousing demand in India in 2022,” he said.
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According to Savills India, growing demand for warehouse space for manufacturing, e-commerce and organised retail are likely to drive warehousing demand in 2022.
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Besides, warehousing policy envisaged by NHAI would be out in 2022, which aims to develop warehousing zones on the National Highways Authority of India (NHAI) land banks under Public Private Partnership (PPP) mode, proposed national logistics policy by department of commerce likely to ease the logistics bottlenecks and development of Multi-Model Logistics Parks (MMLPs) will certainly push the growth of warehousing in the country.
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Industrial And Warehousing Records 44 Mn Sq. Ft Space Absorption In 2021: Savills India
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