I&L sector takes 31.6 mn sq ft on lease in 2022, highest since 2019

Despite global headwinds and a slowdown in e-commerce demand, the space taken on lease by the industrial & logistics sector grew eight per cent year on year to touch 31.6 million sq ft in calendar 2022. This was the highest since the 2019 peak of 32 million sq ft, according to a report by real estate consultant CBRE.

The study says Delhi-NCR led the absorption with 7.3 million sq ft in CY22, followed by Mumbai and Bengaluro with 6.1 million sq ft and 5.2 million sq ft, respectively. The three cities accounted for almost 60 per cent of leasing activity during the year.

The intent to strengthen the supply chain among global and domestic companies drove the spike in 2022. Leasing activity in 2023 is expected to remain range-bound, driven by sustained demand from 3PL, engineering & manufacturing and retail firms, said Anshuman Magazine, chairman & CEO-India, South-East Asia, Middle East & Africa, CBRE.

“On the supply front, we foresee project completions to exceed the 2022 levels and be in line with space take-up during 2023,” added Magazine.

Space take-up was dominated by small-sized deals of 50,000 sq ft and under, which took a share of about 40 per cent in 2022. Medium-sized transactions (50,000–100,000 sq ft) had a 29 per share, while large-sized ones (over 100,000 sq ft) took 31 per cent.

“Mumbai, followed by Delhi-NCR, dominated large-sized deal closures in 2022. In CY22, 3PL, followed by engineering & manufacturing firms, drove large-sized deal closures with a total share of about 65 per cent,” the report said.

Third-party logistics (3PL) players accounted for about half the annual space take-up, driven by heightened demand from interlinked stakeholders across the supply chain such as wholesalers, retailers and e-commerce players, for the need to shore up distribution capabilities.

Ram Chandnani, managing director, Advisory & Transactions Services, CBRE India, said, “We anticipate 3PL firms to drive leasing activity as companies look to shore up their distribution capabilities. Moreover, rental growth is likely to continue in micro-markets, driven by high-quality project completions and the supply-demand imbalance.”

Shailesh Kumar, founder, CABT Logistics also said logistics has become the backbone of any business and as more companies look to expand their distribution capabilities, the logistics sector and leasing will witness steady growth.

The report finds that over the past five years, 3PL players cumulatively leased over 60 million sq ft across India. Most of this take-up was led by domestic occupiers. Engineering & manufacturing firms also picked up pace in CY22 with a share of 16 per cent, compared with 10 per cent in CY21.

Emphasising on the accelerated need for holding inventories across different industries, Vishal Jain, Co-founder, Roadcast Technology, said, “The demand for spaces for micro warehouses is readily growing and besides this, the penetration of e-commerce in two-tier and three-tier cities has also contributed massively to this growth.”

Holding additional inventories at key locations across the country has become the need of the hour for companies offering FMCG, direct-to-consumer brands, quick commerce platforms etc, Jain added.

Real estate players are optimistic about growth in the industrial and logistics sector, especially with capex allocation and increased spending on infrastructure development across the country.

“The infrastructure spend is up by 33 per cent to Rs 10 trillion and we believe the increase in capex and resulting infrastructure development will also ease the development of warehousing and attract investment from the private sector, wishing to capitalise in this development,” said Anshul Singhal, managing director, Welspun One Logistics Parks.