Leasing of industrial spaces declines 12% in Q3 2023 across major cities

The third-quarter of this year witnessed a 12 per cent decline in the leasing of industrial and warehousing spaces across five major Indian cities, totalling 6.2 million square feet. This decrease is attributed to reduced demand in Delhi-NCR and Bengaluru, according to Colliers India. Comparatively, the same period in the previous year saw leasing activity covering 7 million square feet.

For the January to September period, there was a 4 per cent drop in demand, with leasing covering 17.2 million square feet compared to 18 million square feet in the same period the previous year.

Leasing growth in cities

Colliers' data reveals an increase in industrial and warehousing space leasing in Chennai, growing over threefold to 1.8 million square feet during the third quarter, in contrast to 0.5 million square feet in the same period a year earlier. Demand for this type of space in Chennai also rose by 60 per cent during the January to September period, totaling 3.5 million square feet compared to 2.2 million square feet in the corresponding period in the previous year.

In Mumbai, the third quarter saw a more than twofold increase in demand, reaching 1.2 million square feet, compared to 0.5 million square feet in the previous year. Over the first nine months of the year, leasing activity in Mumbai increased by 48 per cent to 3.9 million square feet, up from 2.7 million square feet in the same period the previous year.

Pune witnessed a 22 per cent rise in leasing, covering 1.6 million square feet during the July-September period compared to 1.3 million square feet a year ago. The city also saw a marginal 1 per cent increase in leasing during the January to September period, reaching 4.1 million square feet, up from 4 million square feet in the corresponding period of the previous year.

Leasing of industrial & warehousing spaces falls 12% in Q3 2023 | Image credit: Pexels

On the contrary, Delhi-NCR saw a 76 per cent decrease in demand during the July-September period, covering only 0.9 million square feet, a significant drop from the 3.8 million square feet leased a year ago. For the January-September period, leasing activity in the region fell by 46 per cent, reaching 3.7 million square feet, compared to 6.8 million square feet in the corresponding period the previous year.

Bengaluru also experienced a decline in demand, with a 21 per cent drop in leasing activity during the third quarter, covering 0.7 million square feet compared to 0.9 million square feet a year ago. For the first nine months of the year, leasing decreased by 10 per cent to 2 million square feet, down from 2.3 million square feet in the corresponding period in the previous year.

Leasing sector dynamics

Colliers reported that third-party logistics (3PL) players continued to dominate the leasing demand, making up 40 per cent of the share, followed by engineering players at 17 per cent. On the other hand, leasing by Fast-Moving Consumer Goods (FMCG) companies more than doubled as they expanded their presence in key markets like Delhi-NCR and Pune. This growth in the FMCG sector's leasing can be attributed to increased consumption levels in the past two quarters, which are expected to continue into the last quarter, driven by the upcoming festive season.