Industrial warehousing demand across top five cities rose 11 percent year-on-year to 7.2 million square feet, driven by demand from third-party logistics operators who continued to expand across large markets, forming 41 percent of total leasing during the quarter, a report by Colliers said. The FMCG sector followed at a distant 12 percent of total leasing.

Demand from retail and FMCG sectors saw a three-fold rise y-o-y, as they expanded their footprints in larger markets such as Delhi-NCR and Mumbai. This pick-up in the demand for industrial warehousing space is in sync with the growth in private consumption in the domestic economy.

The quarter also saw the highest leasing in the country by the warehousing segment compared to the previous eight quarters.

Delhi-NCR led the demand during the first quarter accounting for 29 per cent share in total leasing, followed by Mumbai at 25 percent. The financial capital saw 37 percent annual rise in leasing, led by logistics companies.

“3PL operators are targeting larger dense markets with good-quality infrastructure for expansion to ensure quick delivery of online orders,” said Vimal Nadar, Senior Director, and Head of Research, Colliers India.

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Average deal size by 3PL operators in Mumbai was more than 2 lakh square feet, 69 percent higher than the pan India average.

“3PL operators will continue to eye larger markets as they look to augment their distribution network,” Nadar said.

New warehousing stock across the top five cities was limited. Supply declined 8 percent y-o-y to 5.8 msf, as developers remained watchful on the evolving demand scenario. Higher raw material prices and increased logistics costs also impacted new project completions across major markets. Over the next few quarters, developers will continue to remain cautious and are likely to bring in supply to meet market demand, keeping market fundamentals intact, Colliers said.

Owing to limited available supply and robust demand, vacancy levels across the top 5 cities dropped by 170 basis points y-o-y during Q1 2023 to 8.1 per cent. The majority of the markets except Delhi-NCR saw single-digit vacancy levels, backed by steady demand from 3PL, FMCG, and engineering companies. With demand being upbeat amidst limited supply, rentals across top micro-markets saw an annual rise. Chakan in Pune and Bhiwandi in Mumbai were some of the key micro markets which saw an uptick in rentals by 14 percent and 6 percent, respectively.