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The industrial and logistics leasing activity increased by 8% year-on-year (YoY) in 2022 to reach 31.6 million square feet, despite challenges such as global economic conditions, a decrease in e-commerce demand, and reduced post-pandemic inventory needs. These findings are from a report by real estate consultant CBRE.

In the industrial and logistics sector, the second-highest leasing activity was recorded in 2022, reaching a total supply of 20.9 million square feet, following the peak of 32 million square feet in 2019. 

In 2022, Delhi-NCR recorded the highest absorption in the industrial and logistics sector with 7.3 million square feet, followed by Mumbai and Bangalore with 6.1 million square feet and 5.2 million square feet, respectively. Together, these three cities accounted for nearly 60% of the total leasing activity during the year. Except for Bangalore and Pune, all cities reported stable or increased annual space take-up.

The demand for distribution capabilities increased among wholesalers, retailers, and e-commerce players, leading to heightened demand from interlinked stakeholders across the supply chain. As a result, 3PL players accounted for approximately half of the annual space take-up and led the absorption in the industrial and logistics sector.

Over the past five years, 3PL players have leased a total of over 60 million square feet of space in India. The majority of this space take-up was driven by domestic occupiers.

In 2022, engineering and manufacturing firms held a 16% share in the total leasing activity, which was an increase of 6% from the previous year. The Production Linked Incentive (PLI) program served as a growth stimulant for local engineering and industrial players, enabling them to expand their operations.

In 2022, the demand for smaller-sized transactions (<50,000 sq. ft.) dominated the leasing activity, accounting for around 40% of the total. Medium (50,000 – 100,000 sq. ft.) and large-sized (over 100,000 sq. ft.) transactions accounted for approximately 29% and 31%, respectively.

Large-sized deals were mostly closed in Mumbai and Delhi-NCR in 2022, making up about 44% of the total. 3PL and engineering & manufacturing firms were the main drivers of these deals, accounting for approximately 65% of the total.

Most micro-markets across cities saw a rise in quoted rental values due to an improvement in leasing sentiment and an increase in input costs. Only Chennai and Ahmedabad experienced stable rents, while Pimpri – Chinchwad, Chakan – Talegaon, and Hyderabad witnessed YoY rental growth of 20-30%, 23-25%, and 18-20%, respectively.

The intent to strengthen the supply chain among global and domestic companies drove leasing activity in 2022, and this is expected to continue into 2023. 3PL, engineering & manufacturing, and retail firms are expected to sustain demand for leasing activity. Project completions are expected to exceed 2022 levels, and we anticipate that 3PL firms will continue to drive leasing activity as companies aim to strengthen their distribution capabilities. Rental growth is also expected to continue due to high-quality project completions and the supply-demand imbalance.

From July to December 2022, the industrial and logistics sector witnessed a 46% increase in absorption, reaching 18.8 million sq. ft., with sustained leasing by 3PL players (51%), engineering & manufacturing firms (16%), and retailers (8%). Delhi-NCR, Mumbai, and Bangalore led the space take-up during this period, accounting for about 61% of the total absorption.

In the same period, supply addition increased by 11% to around 11 million sq. ft. Delhi-NCR, Chennai, Bangalore, and Mumbai led the development completions, accounting for about 73% of the total supply.

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