Industrial & Logistics Space Demand Hit Record High In 2023: Study

CBRE also discovered that diverse industries, including e-commerce, retail, and manufacturing, chose to outsource their supply chain operations to 3PL firms

Growth in domestic engineering and manufacturing enterprises was significantly fueled by proactive government policies and programs like the Production Linked Incentive scheme

The demand for industrial and logistical facilities reached an all-time high last year in eight major cities, with leasing activity increasing by 8 per cent annually. In addition, leasing industrial and logistics spaces increased to 38.8 million square feet in 2023 from 36 million square feet in 2022, driven primarily by the demand from third-party logistics (3PL) companies, according to a report by a real estate consultant firm CBRE

Anshuman Magazine, Chairman & CEO, India, Southeast Asia, Middle East & Africa, CBRE, said, “As we envision the future of the industrial and logistics sector, this robust growth is a testament to the sector's resilience despite global economic challenges. Leasing activities across the top eight cities remained robust in 2023, showing a steady annual space occupancy.”

“The leasing landscape in 2023 reflects a pronounced influence of 3PL players, commanding a substantial 45 per cent share,” Magazine added.

The consultant firm discovered that diverse industries, including e-commerce, retail, and manufacturing, chose to outsource their supply chain operations to 3PL firms. This calculated decision was made with the intention of reducing costs, increasing flexibility, satisfying storage needs, and resolving labour source issues.

Companies engaged in engineering and manufacturing made up about 17 per cent of all leasing activity. Growth in domestic engineering and manufacturing enterprises was significantly fueled by proactive government policies and programs like the Production Linked Incentive (PLI) scheme.

Leasing of industrial and logistics spaces in Mumbai touched an all-time high, registering 9.9 million square feet in 2023 as against 7.3 million square feet in 2022. Contrary to this, in Delhi-NCR, the demand fell to 7 million square feet last year from 9.4 million square feet in 2022. Bengaluru also saw a 4.7 million square feet dip from 5.9 million square feet. Kolkata, too, witnessed a drop of 3 million square feet from 3.8 million square feet. 

However, in Hyderabad, the demand grew to 4.3 million square feet from 3.7 million square feet. 

In Chennai, the space leased for logistics and industrial purposes rose from 3.9 million to 6 million square feet. Leasing in Pune increased from 0.7 million to 1.7 million square feet. 

Industrial and logistic warehousing space demand in Ahmedabad increased to 2.2 million square feet last year from 1.2 million square feet in 2022.

“Driven by increased demand for high-quality spaces, restricted availability of quality supply in specific locations, and an escalation in land costs, rental values witnessed an annual rise in prominent micro-markets across cities, except in the case of Kolkata,” CBRE said.