Industrial, warehousing space absorption over 44 million sq ft in 2021: Report – The Economic Times

Clipped from: https://economictimes.indiatimes.com/industry/services/property-/-cstruction/industrial-warehousing-space-absorption-over-44-million-sq-ft-in-2021-report/articleshow/88728133.cmsSynopsis

In spite of Covid restrictions and lockdowns impacting construction activities, India witnessed a fresh supply of 45 million sq ft during the year where 36 million sq ft was from tier I cities and 8.9 million sq ft from tier II and III cities.

Industrial and warehousing space absorption stood at 44 million sq ft in 2021 including 35.1 million sq ft from tier I cities and 8.6 million sq ft from tier II and III cities, showed data from Savills India.

In spite of Covid restrictions and lockdowns impacting construction activities, India witnessed a fresh supply of 45 million sq ft during the year where 36 million sq ft was from tier I cities and 8.9 million sq ft from tier II and III cities.

Similar to 2020, 3PL and e-commerce sectors continued to drive warehousing demand accounting 62% of the total absorption in 2021, followed by the manufacturing sector at 14%.

Among the major cities in India, Delhi NCR led with the highest absorption in 2021 at 18% followed by Pune at 15%. Mumbai and Bangalore saw absorptions at 14% and 11% respectively, while tier II & tier III cities accounted for 20%.

In addition, the tier II and III cities such as Rajpura, Lucknow, Coimbatore, Jaipur, Guwahati, Bhubaneswar, Nagpur, Kochi/Ernakulam, Indore, Hosur, and Patna witnessed around 8.6 million sq ft of absorption in 2021.

These cities are poised to gain further momentum in 2022 and 2023 with e-commerce and 3PL firms capitalizing on consumption-driven growth and pushing the demand for warehousing space.

The overall industrial and warehousing space stock in tier I cities is at 266 million sq ft at the end of 2021 and is expected to reach 304 million sq ft in 2022 and 345 million sq ft in 2023.

Vacancy levels in tier I cities have increased from 8.4% in 2020 to 9.4% in 2021 and rental values remained stable in 2021 across the major cities with new projects delivered with improved specifications and of high quality environmental, health & safety (EHS) standards.

The market witnessed 4,200 plus acres of manufacturing and warehousing land transactions across tier I and II cities of which 51% was private land and 49% was government land.

The industrial and logistics sector witnessed investments exceeding $1.5 billion in 2021 making the sector the highest after the office sector to attract such investments. Continued interest in this asset class was due to its growth potential and stable returns. The market is likely to witness continued and growing interest from investors in this asset class in 2022 as well.

“Work From Home and social distancing norms have further fuelled the e-commerce demand and therefore growth of the Indian logistics and warehousing sector. Rising popularity of quick commerce companies and e-commerce companies focusing on improving the delivery time and customer experience will result in rapid growth of Urban warehousing,” said Srinivas N, Managing Director, Industrial and Logistics, Savills India.

According to him, recent reforms announced by the government in tightening import regulations, subsidies in terms of Performance Linked Incentives (PLIs) to attract foreign capital and companies mulling over the “China-Plus-one” strategy triggered due to covid outbreak have resulted into a major transformation in the Indian manufacturing sector.

Besides, strong macroeconomic fundamentals, government initiatives favoring infrastructure development in transport, water, power and communications and support to the growing sectors are likely to drive manufacturing and warehousing demand in India in 2022.

Growing demand for warehouse space for manufacturing, e-commerce and organized retail are likely to drive warehousing demand in 2022. The market is likely to see absorption in excess of 40 million sq ft and supply of over 45 million sq ft during the year.

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