Supply Chain Council of European Union |

Industrial, warehousing space leasing to grow by 83% in 2021

Driven by the combination of robust growth in e-commerce and manufacturing sectors as well as rising demand in emerging tier I and tier II Indian cities, industrial and warehousing space absorption is expected to grow 83% to 47.7 million sq ft in 2021, said property consultant Savills India. The 3PL and e-commerce sectors continued to drive warehousing demand accounting for 60% of total absorption in 2020, followed by the manufacturing sector at 24%.

The growing numbers of firms in these sectors and the huge Indian consumption market have whipped up the investment prospects of India’s warehouse sector. In the year gone by, the industrial and warehousing market witnessed investments in excess of $1 billion. Among the major cities in India, the National Capital Region (NCR) led with the highest absorption in 2020 at 25% followed by Pune at 15%. Mumbai and Chennai saw absorption at 13% each while Kolkata stood at 12%.

The Tier II cities such as Ludhiana, Lucknow, Coimbatore, Jaipur, Guwahati, Bhubaneswar, Nagpur and Patna witnessed around 3 million sq ft in 2020. These cities are likely to gain further momentum in 2021 with e-commerce and 3PL firms capitalizing on consumption-driven growth and pushing the demand for warehousing space.

“Growing demand for cold chain, pharmaceutical warehouses as well as growth in e-commerce and organised retail are likely to drive warehousing demand in 2021. In addition, strong macro-economic fundamentals and government’s policy support in implementation will continue to fuel growth for the entire sub asset class of industrial and logistics,” said Srinivas N, Managing Director, Industrial and Logistics, Savills India.

On the supply side, Savills India expects a 113% increase in supply to 47.9 million sq ft in 2021. Despite construction activities getting affected due to the lockdown, the top-8 cities of India witnessed a fresh supply of 22.4 million sq ft last year. NCR accounted for 22% of the total supply witnessed in 2020 followed by Chennai at 20%, and Bangalore 12%. The overall industrial and warehousing space stock is expected to increase by 21% at 278 million sq ft in 2021 as compared to 230 mn sq. ft. last year.

Warehousing space vacancies have also decreased by 170 basis points from 10.2% in 2019 to 8.5% in 2020 and rental values remained stable in 2020 across the major cities. “India is emerging as an alternate manufacturing investment destination. Foreign manufacturing companies are planning to shift their manufacturing base to India. This would lead to an increased demand for both ready high spec fitted out and custom-built industrial spaces across India particularly from growing sectors such as FMCG, energy, automobile, electronics, pharmaceutical, medical devices among others,” added Srinivas N.

Going forward, improved specifications and strong compliance will set the pace and lead to the growth of the industrial and allied sectors. Diverse investment opportunities and growing interest in developing infrastructure around Integrated Industrial Townships, highways, ports, inland waterways, Inland Container Depots (ICD’S), and Free Trade & Warehousing Zones (FTWZs) will boost the sector. Automation and manpower will steer disruptions in the years ahead.

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