The year 2023 witnessed an unprecedented surge in the demand for industrial and logistics spaces across eight major cities, reaching an all-time high of 38.8 million square feet, according to a report by real estate consultant CBRE. This remarkable growth, fueled primarily by third-party logistics (3PL) companies, reflects the resilience of the sector despite global economic challenges.
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Robust Leasing Activity
CBRE‘s latest report highlights an annual increase of eight percent in leasing activity, with industrial and logistics spaces witnessing heightened demand. The sector’s ability to navigate challenges and maintain steady annual space occupancy underscores its strength and adaptability.
Influence of 3PL Players
A significant aspect of the leasing landscape in 2023 is the dominant presence of 3PL players, commanding a substantial 45% share. Diverse industries, including e-commerce, retail, and manufacturing, opted to outsource supply chain operations to 3PL firms. This strategic move aimed to meet storage needs, enhance flexibility, reduce costs, and address labor-related challenges.
Sector-wise Leasing Activity
Engineering and Manufacturing: Engineering and manufacturing companies constituted 17% of the total leasing activity. Proactive government policies, such as the Production Linked Incentive (PLI) scheme, played a pivotal role in fostering the growth of domestic engineering and manufacturing firms.
City-wise Dynamics
Mumbai: The leasing of industrial and logistics spaces in Mumbai reached an unprecedented 9.9 million square feet in 2023, a substantial increase from the previous year’s 7.3 million square feet.
Delhi-NCR: The demand in Delhi-NCR saw a slight decline, reaching 7 million square feet in 2023 compared to 9.4 million square feet in the previous year.
Bengaluru: Bengaluru experienced a decrease in demand, with leasing activity declining to 4.7 million square feet from 5.9 million square feet.
Kolkata: Kolkata witnessed a dip in demand, with leasing activity decreasing to three million square feet from 3.8 million square feet.
Hyderabad: In contrast, Hyderabad saw an increase in demand, reaching 4.3 million square feet from 3.7 million square feet.
Chennai: Leasing of industrial and logistics spaces in Chennai witnessed substantial growth, reaching 6 million square feet from 3.9 million square feet.
Pune: Pune experienced an uptick in leasing, reaching 1.7 million square feet from 0.7 million square feet.
Ahmedabad: The demand for industrial and logistic warehousing spaces in Ahmedabad rose to 2.2 million square feet in 2023 from 1.2 million square feet in the previous year.
Factors Driving Growth
The surge in demand for high-quality spaces was fueled by various factors, including restricted availability of quality supply in specific locations, increased demand for top-notch facilities, and an escalation in land costs. Rental values experienced an annual rise in prominent micro-markets across cities, except Kolkata.
The record-breaking demand for industrial and logistics spaces in 2023 underscores the sector’s vitality and adaptability. Despite economic challenges, the influence of 3PL players, government initiatives, and city-specific dynamics have contributed to the sector’s resilience. As leasing activity continues to shape the real estate landscape, the year 2023 stands as a testament to the thriving demand for industrial and logistics spaces across key cities.