Warehouse Space Demand In Bengaluru, Chennai, Hyderabad Dips 5% In 2023: Report

Key drivers of demand for warehousing spaces include third-party logistics firms, engineering and manufacturing companies, as well as e-commerce players

The leasing of warehousing spaces in three prominent southern cities, including Bengaluru, Hyderabad, and Chennai, experienced a 5 per cent decline, reaching 10.2 million square feet last year due to subdued demand, according to real estate consultant Vestian data. In 2022, the total leasing of warehousing space in these three cities amounted to 10.7 million square feet.

Key drivers of demand for warehousing spaces include third-party logistics firms, engineering and manufacturing companies, as well as e-commerce players.

According to the data, the collective share of Bengaluru, Hyderabad, and Chennai decreased to 27 per cent in 2023, down from 34 per cent in 2022. Across seven major cities, the leasing of warehousing and logistics spaces experienced a 21 per cent increase, reaching 37.8 million square feet in 2023 compared to 31.2 million square feet in the preceding year. 

Notably, Bengaluru witnessed a decline in demand, dropping from 4.1 million square feet to 3.6 million square feet, while Hyderabad saw a decrease from 3.7 million square feet to 3.1 million square feet. Conversely, Chennai saw an uptick in leasing activity, rising from 2.9 million square feet to 3.5 million square feet. Mumbai experienced a significant surge in the leasing of warehousing space, jumping from 6 million square feet to 10.2 million square feet. In Delhi-NCR, demand increased to 8.8 million square feet from 7.3 million square feet, while in Pune, leasing activity rose from 5.2 million square feet to 7 million square feet. Vestian attributed Pune's growth to the Chakan MIDC trade hub, which hosts large manufacturing and logistics parks. 

In contrast, Kolkata witnessed a decline in leasing activity, dropping from 2.1 million square feet to 1.6 million square feet. Vestian highlighted the limited availability of Grade A warehouses in Kolkata as a challenge in meeting the growing demand, resulting in decreased absorption.

Shrinivas Rao, CEO at Vestian, said, "The Union Budget 2024-25 is expected to set the tone for next couple of years. Recent announcements of infrastructure development in the interim Budget may have a positive impact on the sector." 

"However, 2024 can be a challenging year for the Indian warehousing sector as investments were on a downward trend in 2023," Rao added.