Industrial and warehousing leasing saw strong demand at 22 million square feet in 2021: Colliers
Supported by the surge in demand for warehousing in the e-commerce segment and strong production growth, 2021 saw the rental of nearly 22 million square feet of industrial and warehousing facilities in the five main cities of the country. According to a report by real estate services company Colliers, demand for high-quality storage space was led by 3PL (third-party logistics) players with a 33% share, followed by e-commerce companies with a 29% share. total rental.
Geographically, demand for industrial and warehousing space was led by Delhi-NCR with a 29% market share, followed by Pune and Mumbai with 21% and 20%, respectively. With NH8 becoming the preferred cluster, Delhi-NCR recorded a total rental of 6.5 million square feet of such space in 2021.
The report shows that despite the effects of the COVID-19 pandemic, strong momentum has been observed in the rental market. Apart from increasing demand for industrial space in cities like Chennai, Pune and Delhi NCR, active rental demands in Tier II emerging markets due to the need for last mile delivery for customers have also been recorded. .
Shyam Arumugam, Managing Director, Industrial and Logistics Services, Colliers India, said, “Offer introduction in most markets is seeing strong recovery despite rising material prices which continue to be a challenge. Category A absorption in key cities stood at 22 million square feet, with the e-commerce and 3PL sectors once again dominating the use of space.”
Arumugan added that with the government pushing for the adoption of clean mobility and the successful rollout of LIP programs in key manufacturing sectors, the momentum in this space is likely to fuel further demand for the space.
In 2021, the total supply of Class A industrial and warehousing products increased by 8% to 24 million square feet, driven by increased building completions in Delhi-NCR and Chennai. The pan-India Grade A vacancy rate fell six-month to 11.5% from 12.2% in June 2021. This was driven by lower-than-expected new supply and robust lettings in Class A properties.
“Occupants prefer Class A properties with good eave height and compliances. Nearly 66% of total rentals were seen in Class A industrial and warehousing facilities, indicating an increased trend for high quality structures. In-city warehouses and smaller distribution centers are in high demand in major metropolitan cities as delivery times become shorter from same-day delivery to minutes-long deliveries for essential products,” said said Vimal Nadar, Senior Director, Research, Colliers India.
E-commerce companies leased 6.6 million square feet of warehouse space in 2021, representing a 29% share. The share was dominated by the large spaces that e-commerce companies typically occupy for their fulfillment centers.
Interestingly, nearly 14% of this space grabbing demand came from pure food and grocery retail businesses, driven by increased demand for online grocery shopping across the country. By emphasizing 30-minute deliveries in major cities, these companies have taken up space for warehousing in the city, closer to demand centers.
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