Chennai and Delhi NCR Surge in Warehousing Leasing Demand

Chennai and Delhi NCR are firmly positioned as frontrunners in India’s industrial and warehousing sector, showcasing remarkable growth in demand. In the first half of 2024, these cities collectively accounted for nearly half of the 13 million square feet leased across the top five urban centres, marking a significant 17% year-on-year increase in leasing activity. This trend underscores the escalating need for industrial and warehousing space as businesses expand their operations.

The primary occupiers of this burgeoning space are Third-Party Logistics (3PL) firms, which contributed approximately 36% to the overall demand during this period. Chennai, in particular, has seen a remarkable surge, with demand nearly doubling compared to the same timeframe last year, largely propelled by the warehousing needs of 3PL providers. Other key micro markets, such as Bhiwandi in Mumbai, Chakan-Talegaon in Pune, and Oragadam in Chennai, also reported significant uptake, each exceeding 1.5 million square feet. Colliers India reported a substantial 48% year-on-year increase in demand for Q2 2024, with around 6 million square feet leased across the top five cities. Delhi NCR emerged as the leader for quarterly demand, registering 1.8 million square feet of leasing activity—accounting for 30% of the total. This growth was primarily fuelled by increased activity in the Farukhnagar and Sonipat micro markets. Developers, recognising the robust demand along with supportive government policies, have been investing heavily in high-quality warehousing facilities, integrating advanced technological features. This year is projected to see an increase of 20-25 million square feet in Grade A supply.

In addition to 3PL companies, other sectors, including engineering, FMCG, and electronics, have also demonstrated significant uptake, contributing 12-16% each to the overall demand. The engineering and electronics sectors, in particular, experienced leasing activity more than 1.7 times higher than in the first half of 2023. This diversified demand landscape is expected to persist, buoyed by favourable industry-specific policies and an enabling regulatory framework. However, despite the strong demand, the supply of Grade A warehousing spaces has outpaced it, leading to a notable 210 basis point increase in vacancy levels, which stood at 12.2% at the end of H1 2024. Developers, anticipating sustained demand, introduced 14.4 million square feet of new supply in the same period—a 35% increase year-on-year. Notably, Delhi NCR accounted for 40% of the total completions, with 5.7 million square feet of new developments. The second quarter of 2024 alone witnessed approximately 7.5 million square feet of completions in the top five cities, marking the highest quarterly supply infusion in two years. This influx of high-quality supply has resulted in a noticeable rise in rentals across key micro markets.

Large-scale deals, defined as transactions exceeding 200,000 square feet, made up about 35% of the demand in H1 2024. While the majority of these deals were driven by 3PL players, the electronics and FMCG sectors also made significant contributions. Chennai and Delhi NCR led the way in this segment, further solidifying their importance in the industrial and warehousing market. Looking ahead, the future of industrial and warehousing demand in India appears robust, with a range of sectors driving growth and developers responding with significant new supply. The synergy between government policies and market dynamics suggests a balanced and sustainable expansion for this critical sector, ensuring its continued relevance in India’s economic landscape.