Industrial and warehousing space leasing rose 6 per cent to 46.3 million square feet last year across major cities of India, according to Savills India.
In its latest report, property consultant Savills India said that the leasing of industrial and warehousing space rose 3 per cent in 2022 across eight major tier-I cities to 36.2 million square feet from 35.1 million square feet.
The absorption of space in tier II-III cities increased to 10.1 million square feet in 2022 from 8.6 million square feet in the previous year.
The Tier II and III cities include Coimbatore, Guwahati, Indore, Nagpur, Lucknow, Jaipur, Rajpura, Bhubaneswar, Kochi/Ernakulam, Patna, Hosur, Madurai, Varanasi, Hubli and Ludhiana.
Among the major cities in India, Delhi-NCR saw the highest absorption in 2022 at 16 per cent, followed by Mumbai at 14 per cent.
Pune and Bengaluru saw absorptions at 13 per cent and 12 per cent, respectively, while tier II and III cities accounted for 22 per cent.
Third-party logistics (3PL) and e-commerce sectors continued to drive warehousing demand, together accounting for 52 per cent of the total absorption witnessed in 2022.
The manufacturing sector contributed 16 per cent in demand while the retail sector 13 per cent.
The consultant highlighted that Grade A space accounted for 42 per cent of the total absorption.
"The rapidly expanding and highly competitive e-commerce market has fuelled the growth of industrial, logistics and warehousing over the last two years," said Srinivas N, Managing Director, Industrial and Logistics, Savills India.
The industrial and logistics sector is likely to see an absorption of over 40 million square feet in 2023.
"This demand for space could stem from emerging Tier II & III cities, growing demand for urban warehousing and a major transformation in the Indian manufacturing sector backed by Performance Linked Incentives (PLIs) and efficient multi-model connectivity plan for local and global distribution," Srinivas said.
The overall industrial and warehousing space stock in tier-I cities stood at 300 million square feet at the end of 2022 and is expected to reach 342 million square feet this year.