According to statistics from Savills India, industrial and warehouse space absorption in 2021 was 44 million sq ft, with 35.1 million sq ft from tier I cities and 8.6 million sq ft from tier II and III cities.
Despite the impact of Covid limitations and lockdowns on building activity, India saw a fresh supply of 45 million sq ft this year, with 36 million sq ft coming from tier I cities and 8.9 million sq ft coming from tier II and III cities.
In 2021, the 3PL and e-commerce sectors, which accounted for 62 per cent of total absorption in 2020, continued to drive warehouse demand, followed by the manufacturing sector, which accounted for 14 per cent.
In 2021, Delhi NCR had the most extensive absorption among India’s main cities, at 18 per cent, followed by Pune at 15 per cent. Absorption rates were 14 per cent and 11 per cent in Mumbai and Bangalore, respectively, with 20 per cent in tier II and tier III cities.
With e-commerce and 3PL enterprises capitalising on consumption-driven growth and driving demand for warehouse space, these cities are set to gain even more traction in 2022 and 2023. At the end of 2021, the total industrial and warehouse space stock in tier I cities was 266 million square feet, with projections of 304 million square feet in 2022 and 345 million square feet in 2023.
Vacancy rates in Tier I cities climbed from 8.4% in 2020 to 9.4% in 2021, but rental prices remained consistent in 2021 throughout the major cities, thanks to new developments that met enhanced specifications and met high environmental, health, and safety (EHS) requirements.
In tier I and II cities, the market saw 4,200 acres of manufacturing and warehousing land sales, with 51 per cent private property and 49 per cent government land.
In 2021, investments in the industrial and logistics sector exceeded $1.5 billion, making it the second-highest recipient of such funds after the office sector. This asset class has maintained its popularity due to its high growth potential and consistent returns. In 2022, the market is projected to see ongoing and rising investor interest in this asset class.
Apart from solid macroeconomic fundamentals, government measures favouring infrastructure expansion in transportation, water, power, and communications and assistance for emerging industries are expected to stimulate manufacturing and warehousing demand in India in 2022.
In 2022, warehousing demand is expected to rise due to increased demand for manufacturing, e-commerce, and organised retail. The market is expected to witness absorption of more than 40 million square feet and a supply of more than 45 million square feet during the year.