Real Estate

Warehousing demand witness 35% rise in Tier-I cities in 2021

Abishek Law | | Updated on: Jan 06, 2022
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Driven by e-commerce and manufacturing sectors, there are about 4,200 plus acres of manufacturing and warehousing land transactions.

Driven by demand from 3PL, e-commerce and manufacturing sectors, industrial and warehousing space absorption saw a 35 per cent year-on-year growth across Tier-I cities of India in 2021. Absorption in 2020 was to the tune of 26 million.

Supply of new spaces saw an over 64 per cent jump year-on-year in the Tier-I cities that primarily include Delhi-NCR, Bengaluru, Mumbai, Chennai, Ahmedabad, Kolkata and Pune, to 36 million sq ft; up from the 22 million sq ft, in the year-ago period.

Among cities, Delhi-NCR reported the highest supply addition and absorption to the tune of 11.4 million sq ft and 8.1 million sq ft, respectively. This was followed by Mumbai, where supply was to the tune of 7.5 million sq ft; while absorption was around 6.0 million sq ft.

Over 60 per cent of the demand was driven by 3PL and e-commerce sectors; followed by the manufacturing sector at 14 per cent. The FMCG and retail sector – put together – accounted for around 13 per cent of the absorption requirement.

The warehousing space stock in Tier I cities stood at 266 million sq ft in 2021. This is expected to reach 304 million sq ft in 2022 and 345 million sq ft in 2023, indicating a YoY growth of over 14 per cent and over 13 per cent, respectively.

Vacancy levels in Tier I cities have increased to 9.4 per cent in 2021 (up from 8.4 per cent in 2020).

Tier-II Investments

According to real estate consultancy firm Savills, Tier II & 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.

Coimbatore, followed by Hosur, Rajpura and Indore were among the most popular small-town destinations that witnessed absorption of over 1 million sq ft of space.

“The market is likely to see absorption in excess of 40 mn sq.ft (including Tier I, II & III cities) in 2022. On the supply side, we expect over 45 million sq ft of space to come up during the same period,” Srinivas N, Managing Director, Industrial and Logistics, Savills India, said.

Investor Appetite

India witnessed 4,200 plus acres of manufacturing and warehousing land transactions; of which 51 per cent was private land, and 49 per cent was government land.

Investments in the sector exceeded $1.5 billion in 2021, analysts told BusinessLine, adding that warehousing remained the most popular asset class for investors after commercial / office space.

According to Srinivas, 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 the “China-Plus-one” strategy triggered due to covid outbreak have resulted into a major transformation in the Indian manufacturing sector.

“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 adding that the NHAI’s upcoming warehousing policy and a push towards Multi-Model Logistics Parks were further positives for the sector.

Published on January 06, 2022

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