3PL Players Continue to Drive Industrial & Logistics Leasing with 40% share in Jan-Jun 2024

New Delhi / 16 Aug 2024: CBRE South Asia Pvt. Ltd, India’s leading real estate consulting firm, today announced the findings of its report – ‘CBRE Industrial & Logistics Figures H1 2024’. As per the report, 3PL players continued to drive Industrial & Logistics (I&L) absorption with a 40% share in Jan-Jun’24 period, followed by Engineering & Manufacturing (E&M) firms with an 18% share and FMCG firms at 10%. It is likely that 3PL players will lead the I&L leasing activity as retail, e-commerce and manufacturing players continue to progressively outsource their inventory and delivery capabilities to optimize costs and minimize lead time. The E&M firms will also drive sizable leasing, backed by the government’s concerted efforts to bolster domestic manufacturing.

During Jan-Jun’24 period, Industrial & Logistics (I&L) leasing across 8 cities saw a moderation, totalling 16.6 mn. sq.ft. Despite this, a rebound in space absorption is expected in the second half of the year, driven by new market entrants, increased inquiries, high-quality supply, and the finalization of pending deals in sectors like 3PL, retail, and FMCG. 

Supply additions decreased by 16% to 15.5 million sq. ft. during this period, with Chennai, Bengaluru, and Mumbai contributing 57% of the total supply. Larger developers, backed by institutional investors, accounted for about 33% of this supply, with Chennai, Delhi-NCR, and Pune leading such project completions.

From Jan-Jun’24, the share of FMCG and E-commerce players in total space takeup stood at approximately 10% and 9%, respectively. However, these shares are likely to increase in the second half of the year on account of the festive season-linked surge in sales. Other sectors that drove I&L leasing include retail (7%) and electronics & electricals (6%). 

Bengaluru, Delhi-NCR and Kolkata dominated the leasing activity, cumulatively accounting for almost 58% of the overall space takeup in H1 2024. Additionally, these three cities registered an expansion in space absorption compared to the corresponding period of the previous year.

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Anshuman Magazine, Chairman & CEO, India, Southeast Asia, Middle East & Africa, CBRE, said, “The Indian industrial and logistics (I&L) sector is poised for a period of sustained growth, with promising indicators emerging for the latter half of 2024. While the first half witnessed a shift towards smaller transactions, the market’s underlying fundamentals remain robust. We anticipate a resurgence in leasing activity driven by a combination of factors, including increased demand from diverse sectors, the entry of new market players, and the availability of high-quality supply. These positive developments collectively contribute to an optimistic outlook for the I&L sector”.

Ram Chandnani, Managing Director, Advisory & Transaction Services, CBRE India, said, “The industrial & logistics (I&L) sector is on an upward trajectory and this momentum will gain further acceleration at the back of a resilient economy and proactive policy imperatives. The government’s initiative to build a robust manufacturing ecosystem, driven by Production Linked Incentive (PLI) scheme will not only nurture domestic occupier interest but will also boost the sentiments of institutional investors. Moreover, the increasing focus on ESG and sustainable facilities will drive demands from occupiers across industries.”

I&L Outlook 2024:

Leasing activity expected to become robust in the second half.

I&L transaction volumes remained strong in H1 2024, but average deal sizes moderated due to a preference for smaller box sizes.

• Anticipated increase in transaction activity for the remainder of the year, driven by more market entrants and inquiries.

• 3PL firms expected to continue leading leasing activity as companies outsource inventory storage and delivery to optimize costs and minimize lead times.
• Government policies supporting domestic manufacturing likely to boost E&M tenants’ share of space take-ups in the future.

• Retail and FMCG sectors expected to see increased interest, fuelled by a potential surge in consumer demand in the second half of the year.
• E-commerce companies may continue focusing on cost optimization and adopt cautious expansion strategies in the near term.

Organized players likely to further expand their footprint

• Leading institutional investors remain active in the I&L market, despite a slight Y-o-Y decline in supply additions in H1 2024.
• ‘Flight-to-quality’ is becoming more critical, with investment-grade supply projected to rise from 49% in 2023 to around 55% by the end of 2024.
• Delhi-NCR, Chennai, and Bengaluru expected to be the primary contributors to the 2024 supply pipeline, collectively accounting for nearly half of total supply additions.
• Despite rising land costs and longer acquisition timelines, prominent developers/investors continue to pursue acquisition opportunities across key warehousing hubs in both Tier-I and Tier-II cities.