Gross absorption in grade A industrial and warehousing facilities in the top five cities went up by seven per cent on a year-on-year basis at 10.8 million square feet, during the first half of FY 2022, finds the latest report by Colliers.
About 55 per cent of the gross absorption was led by third-party logistics players, followed by the engineering and automobile sectors with a share of 12 per cent each.
“The first half of this year has seen several large deals with average deal size up 27 per cent (YoY). Grade A supply in preferred micro markets across key markets in India continues to remain muted owing to construction slowdown on account of raise in construction costs. We are also witnessing more tier-II city inquiries as key players are strengthening their last-mile delivery supply chain to be proximate to customers,” said Shyam Arumugam, Managing Director, Industrial and Logistics Services, Colliers India.
Supply declines
Overall, grade A supply declined 24 per cent (YoY) across the top five cities to about 11.8 million sq feet in H 1 FY 2022. Developers postponed fresh supply in light of high input costs and are completing projects after seeking pre-commitments from occupiers. Grade A vacancy levels rose to 11.1 per cent at the end of Q2 2022, from 9.8 per cent in Q1 2022.
According to the report, it was largely led by strong leasing activity in Delhi-NCR, Chennai and Pune. The rise in vacancy was led by Delhi-NCR wherein vacancy levels saw an increase during the quarter.
“Occupiers, especially third-party logistics players and e-commerce players are increasingly taking up larger integrated warehousing space. On the supply side, we may see some limitations over the next few quarters as developers face supply chain constraints and rising input cost materials,” said Vimal Nadar, Senior Director and Head, Research Colliers India.
Deals above 100,000 sq feet accounted for 75 per cent of the total leasing. This was led by larger deals by third-party logistics players and fast-moving consumer goods companies, said the release. The five cities covered in the report are Bengaluru, Chennai, Delhi NCR, Mumbai and Pune.