Industrial and logistics sector leasing to grow by 14% in 2024

Tier-I cities witnessed 75% of the absorption while tier II and III cities accounted for the remaining 25%. Tier II and III cities are growing significantly as sourcing hubs, aiding efficient distribution. The absorption is being led by a surge in demand from the manufacturing and retail sectors, as well as continued sustained demand from the 3PL sector.

The report suggests that the sector witnessed a fresh supply of 62 mn sq. ft. in 2023 of which 46.2 mn sq. ft. (75%) was from tier I cities and 15.8 mn sq. ft. (25%) from tier II and III cities. The surge in supply was due to the delivery of projects across the cities by major developers in response to growing demand.

The overall Grade A space accounted for 53% of the supply in 2023 up from 48% in 2022, while overall Grade A absorption accounted for 54% in 2023 up from 42% in 2022, indicating a significant increase in the supply and demand for graded and compliant buildings.

“The 3PL sector is expected to play a pivotal role, contributing over 40% to total absorption.The surge in supply chain outsourcing, coupled with increased manufacturing activity driven by government initiatives such as, Make in India and the PLI scheme, positions the manufacturing sector for robust leasing demand, with a projected contribution of over 30% to total absorption in 2024,” said Srinivas N.

India’s warehousing revolution was orchestrated by the e-commerce industry; this segment has transformed the warehousing sector from a basic backend storage facility into a versatile and cutting-edge modern complex by prioritizing & enhancing operational efficiency including large investments into Robotics, Sortation, WMS services and upgraded racking & shelving systems.

We expect e-Commerce sector contribution is set to surpass 12 to 15 million sq. ft. between 2025 and 2030 with a significant portion originating from tier II & III cities.

Rental values are expected to increase marginally across the cities for compliant buildings in 2024. The magnitude of growth will be in the range of 2% to 6% depending on the location and city.