The demand for industrial and logistics spaces soared to unprecedented levels across eight major cities in 2023, witnessing a remarkable annual increase of 8 percent, as reported by CBRE. In its recent findings, the real estate consultancy highlighted that the leasing activity in industrial and logistics segments surged to 38.8 million square feet, up from 36 million square feet in the previous year, driven primarily by the growing demand from third-party logistics (3PL) companies.

Resilience Amid Challenges

Anshuman Magazine, Chairman & CEO, India, Southeast Asia, Middle East & Africa at CBRE, emphasized the resilience of the industrial and logistics sector in the face of global economic uncertainties. He stated that the robust growth in leasing activity underscores the sector’s ability to thrive amidst challenges, reflecting a positive outlook for its future.

Influence of 3PL Players

Magazine noted that 3PL players played a significant role in shaping the leasing landscape, commanding a substantial 45 percent share of the market. Various industries, including e-commerce, retail, and manufacturing, opted to outsource their supply chain operations to 3PL firms to meet storage needs, enhance flexibility, reduce costs, and address labor-related challenges.

Sector-wise Trends

Engineering and manufacturing companies accounted for 17 percent of the total leasing activity, signaling their continued importance in driving demand for industrial and logistics spaces. Government initiatives such as the Production Linked Incentive (PLI) scheme further fueled the growth of domestic engineering and manufacturing firms.

City-wise Analysis

While leasing activity witnessed mixed trends across different cities, Mumbai recorded an all-time high of 9.9 million square feet in 2023, reflecting robust demand for industrial and logistics spaces. Conversely, Delhi-NCR experienced a decline in demand, falling to 7 million square feet from 9.4 million square feet in the previous year.

Bengaluru, Kolkata, and Chennai also saw decreases in leasing activity, while Hyderabad observed growth, reaching 4.3 million square feet from 3.7 million square feet. Pune witnessed a substantial increase in leasing, rising to 1.7 million square feet from 0.7 million square feet.

Rental Value Dynamics

Driven by heightened demand for high-quality spaces, limited availability of quality supply in specific locations, and rising land costs, rental values experienced an annual increase in prominent micro-markets across cities, except in Kolkata.

In conclusion, the surge in demand for industrial and logistics spaces in 2023 reflects the resilience and adaptability of the sector amidst evolving market dynamics. The strategic role played by 3PL players, coupled with government initiatives to bolster domestic manufacturing, underscores the sector’s potential for sustained growth and development in the coming years.