The leasing of industrial space in India for light manufacturing activities surged by 23 per cent to reach 15.9 million square feet across eight major cities in 2023, attributed to favourable government policies, according to an annual report released by the real estate consultant Cushman & Wakefield. This marked a notable increase from the 12.91 million square feet recorded in 2022.
As per the report released on Thursday, Pune and Chennai contributed 53 per cent and 24 per cent, respectively, to the total leasing of industrial space in 2023 across the eight major cities.
"The growth in industrial leasing indicates that manufacturing is on an uptrend on the back of healthy capacity utilisation, implementation of business plans by domestic firms and incentivisation of investments by multinationals through favourable government policies such as the multi-sector PLI scheme," the consultant said.
Industrial sheds available for lease primarily serve light manufacturing activities, with a focus on sectors like automobile, engineering, and FMCG (Fast Moving Consumer Goods). Typically, heavy manufacturing companies opt for long-term leases or land purchases for the self-development of facilities; hence, such data is not included.
According to the data, leasing of industrial space in Pune increased from 7.69 million square feet in the previous year to 8.37 million square feet in 2023. In Chennai, leasing more than doubled from 1.58 million square feet to 3.81 million square feet. Mumbai witnessed a leasing of 1.05 million square feet in 2023 compared to 0.03 million square feet the year before. Leasing in Ahmedabad grew from 0.40 million square feet to 0.70 million square feet year-on-year.
However, demand decreased in Bengaluru from 2 million square feet to 1 million square feet, while Delhi-NCR saw a marginal decline from 1.06 million square feet to 0.98 million square feet. There was no demand in Kolkata and Hyderabad.
Regarding warehousing or logistics space, leasing decreased by 7 per cent from 40.39 million square feet in 2022 to 37.67 million square feet in 2023 across seven major cities. Total leasing, combining industrial and logistics spaces, rose by 1 per cent from 53.3 million square feet in 2022 to 53.57 million square feet last year, as per the report.
"Logistics & Industrial segment in India has defied global uncertainties to achieve a stable growth for two years in a row. This is fuelled by a confluence of factors, including strong economic and industry fundamentals, rapidly growing sectors like manufacturing and 3PL, and supportive government policies like the PLI scheme," said Abhishek Bhutani, Managing Director, Logistics & Industrials, Cushman & Wakefield.
He anticipated that this trend would persist in 2024, further establishing logistics and industry as pivotal contributors to the growth of Indian real estate. Despite a decrease in warehouse leasing by e-commerce firms in 2023, demand from third-party logistics (3PL) operators, manufacturing, and retail firms remained robust.
"This shift suggests a possible growing trend of e-commerce companies outsourcing their logistics and warehousing operations to 3PL specialists, allowing them to focus on their core business activities," the consultant said.
Meanwhile, Mumbai took the lead in 2023 as the premier warehousing hub, commanding a significant 27 per cent share of the market. Following closely behind was Chennai, with 19 per cent, while Delhi and Pune secured 18 per cent and 12 per cent shares, respectively.