The industrial and logistics sector absorbed 11.4 million square feet (msf) in the third quarter of 2023, with Tier I cities leading the transactions (78 percent) at 8.9 msf, Savills India said in a report.
The report said that the sector witnessed a fresh supply of 17.8 msf in Q3 2023 of which 14.1 msf (79 percent) was in Tier I cities and 3.7 msf (21 percent) in tier II and III cities. The surge in supply was due to the delivery of projects across the cities by major developers in response to growing demand, it said.
“With developments such as industrial & dedicated freight corridors, inland waterways, along with improved infrastructure the sector is poised for exponential growth. We expect the industrial and logistics sector likely to absorb in excess 40 million sq. ft. and supply more than 45 msf in 2023,” Srinivas N, Managing Director, Industrial and Logistics, Savills India said.
The overall grade A space accounted for 54 percent of the supply and 52 percent of the absorption in the quarter.
In tier I cities, grade A space accounted for 62 percent of the supply and 54 percent of the absorption, indicating a significant increase in the supply and demand for graded and compliant buildings in tier I cities.
The manufacturing sector drives demand
In the quarter, the manufacturing sector drove overall demand, accounting for 33 percent of the total absorption.
Third-party logistics firms, popularly known as 3PL sector, followed closely behind the manufacturing sector, accounting for a 32 percent contribution to total absorption.
Delhi-NCR remained at the top, with the highest contribution of 31 percent to total supply, closely followed by Mumbai with 12 percent.
Chennai and Bengaluru contributed 8 percent and 7 percent, respectively to the total supply. Tier II and III cities together accounted for 21 percent of the total supply.