The industrial and warehousing sector has experienced a notable surge in both demand and supply in the first quarter of 2024. With new supply nearing 7 million square feet—its highest in two years—the sector’s performance has been robust. Notably, 33% of the new Grade A developments were concentrated in Delhi NCR.
Leasing activity across the top five cities remained steady at 7 million square feet, with Mumbai and Chennai driving demand with a combined 55% share. Chennai’s leasing activity stood out, nearly doubling the figures from the same period last year. Among the top cities, Bhiwandi in Mumbai led with 1.7 million square feet of Grade A demand, followed by Oragadam in Chennai, which surpassed leasing activity in Chakan Talegoan, Pune.
The third-party logistics (3PL) sector was the primary occupier, contributing over 40% to total warehousing demand. Chennai alone accounted for 43% of the 3PL activity in these top cities. Retail players followed with a 16% share of the demand, while engineering and automobile sectors each held a 12% share.
Surge in Retail and E-Commerce Leasing
The retail and e-commerce segments saw a dramatic increase in leasing, with the e-commerce sector experiencing a 2.3-fold growth compared to Q1 2023. The rise in e-commerce has been attributed to increased focus on digital infrastructure and changing consumption patterns. The emergence of Q-commerce is expected to further boost demand for larger hub warehouses.
Similarly, retail players’ demand for warehousing space more than doubled in Q1 2024, driven by strong activity in large department stores. This trend indicates a potential for continued healthy demand in the coming quarters.
Large Deals Dominate the Market
Large deals, defined as those exceeding 200,000 square feet, accounted for 51% of the total demand in Q1 2024, a significant increase from the 40% share in 2023. The bulk of these large deals were driven by 3PL companies, with retail and e-commerce sectors also contributing significantly. Chennai and Mumbai were the leading cities for these sizable transactions.
Developer Confidence and Market Outlook
Despite the increase in supply and healthy demand, vacancy levels rose slightly to 11%, up 120 basis points from Q4 2023, due to churn and exits. Rental rates remained stable, with an 8% rise observed in select micro-markets of Chennai and Pune.
Vimal Nadar, Senior Director and Head of Research at Colliers India, noted, “With a Grade A supply pipeline of 23-25 million square feet for 2024, supply is expected to closely follow demand trends. The strong start to the year suggests a promising outlook for the industrial and warehousing sector throughout 2024.”
