Industrial and warehousing space absorption is expected to grow by 83% to 47.7 million sq ft in 2021, driven by a robust growth in e-commerce and manufacturing sectors as well as rising demand in emerging tier I and tier II cities, according to Savills India, a global property consultancy firm.
The 3PL and e-commerce sectors continued to drive warehousing demand accounting for 60% of the total absorption in 2020, followed by manufacturing sector at 24%.
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 12.0%. The Tier II cities such as Ludhiana, Lucknow, Coimbatore, Jaipur, Guwahati, Bhubaneswar, Nagpur and Patna witnessed around 3 million sq. ft. in 2020.
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 (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 million sq ft last year.
“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,” said Srinivas N, managing director, Industrial and Logistics, Savills India.
Warehousing 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.
In 2020, the industrial and warehousing market witnessed investments in excess of 1 billion USD, the company said.
