Chennai and Delhi NCR have emerged as leaders in the industrial and warehousing sector, driving substantial growth in demand. In the first half of 2024, these two cities accounted for nearly half of the 13 million square feet of leasing activity recorded across the top five cities in India. This represents a 17% year-on-year increase, highlighting a robust demand for industrial and warehousing space.
Third-Party Logistics (3PL) players remained the primary occupiers of warehousing space, contributing to approximately 36% of the overall demand in the first half of the year. Chennai experienced a notable surge in demand, nearly doubling compared to the same period last year, driven predominantly by the warehousing needs of 3PL companies. Significant warehousing space uptake was also observed in key micro markets such as Bhiwandi in Mumbai, Chakan-Talegaon in Pune, and Oragadam in Chennai, each exceeding 1.5 million square feet. Spokesperson of Colliers India, noted a 48% year-on-year increase in demand in Q2 2024, with about 6 million square feet of industrial and warehousing space leased across the top five cities. Delhi NCR led the quarterly demand with 1.8 million square feet of leasing, accounting for 30% of the total. The demand in this region was driven by significant uptake in the Farukhnagar and Sonipat micro markets. Developers, recognising the strong demand and supportive government policies, have been investing in high-quality warehousing facilities equipped with advanced technological features. The first half of 2024 saw significant completions, with Grade A supply expected to increase by 20-25 million square feet for the year.
Apart from 3PL players, sectors such as engineering, FMCG, and electronics also showed significant space uptake, each contributing 12-16% to the overall demand. The engineering and electronics segments, in particular, saw over 1.7 times the leasing activity compared to the first half of 2023. This diverse demand is likely to continue, driven by favourable industry-specific policies and an enabling regulatory framework. Despite the robust demand, the supply of Grade A warehousing spaces has outpaced it, leading to a 210 basis point increase in vacancy levels, which stood at 12.2% at the end of H1 2024. Developers, anticipating continued strong demand, introduced 14.4 million square feet of new supply in H1 2024, a 35% year-on-year increase. Delhi NCR accounted for 40% of the total completions, with 5.7 million square feet of new developments. Q2 2024 alone witnessed about 7.5 million square feet of completions in the top five cities, marking the highest quarterly supply infusion in the last two years. This influx of high-quality supply has led to an appreciable uptick in rentals in key micro markets.
Large deals, defined as those exceeding 200,000 square feet, constituted about 35% of the demand during H1 2024. While most of these deals were driven by 3PL players, significant contributions also came from the electronics and FMCG sectors. Chennai and Delhi NCR dominated the large-sized deal segment, underscoring their pivotal role in the industrial and warehousing market. The future of industrial and warehousing demand in India looks promising, with diverse sectors driving growth and developers responding with substantial new supply. The alignment of government policies and market dynamics suggests a balanced and sustainable expansion of this critical sector.
