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The industrial and logistics sector in India has kicked off 2024 with a robust performance, marking a significant surge in absorption compared to the same period last year. According to the latest report from Savills India, a leading international real estate advisory firm, the sector recorded a remarkable absorption of 13.5 million square feet in the first quarter of 2024, up from 11.0 million square feet in Q1 2023, reflecting a substantial year-on-year growth of 22.7%.
Tier I cities spearheaded this surge, accounting for a staggering 78% of the absorption, with tier II and III cities contributing the remaining 22%. The surge in absorption was primarily driven by sustained demand from third-party logistics (3PL) and manufacturing sectors, coupled with a notable uptick in demand from the fast-moving consumer goods (FMCG) sector.
The report highlights that the uptake of manufacturing warehouses has significantly strengthened the overall absorption figures. In Q1 2024, the sector witnessed a fresh supply of 12.9 million square feet, marking a 4% growth rate from the same period last year. Notably, tier I cities dominated the supply landscape, accounting for 76% of the total supply, while tier II and III cities contributed 24%.
Grade A spaces constituted a significant portion of both supply and absorption, comprising 45% of the supply and 41% of the absorption in Q1 2024. This trend is attributed to changing occupier preferences, particularly in meeting Environmental, Social, and Governance (ESG) standards, which are driving demand for high-quality warehousing and factory spaces.
The demand composition remained relatively stable, with 3PL continuing to be the largest constituent, representing 36% of the overall absorption in Q1 2024. Furthermore, the manufacturing sector, buoyed by government incentive schemes, maintained a substantial share of demand, accounting for 25% of absorption in Q1 2024.
Delhi-NCR emerged as the frontrunner in both supply and absorption, contributing 23% and 21% respectively in Q1 2024. Other key players in the supply landscape included Bengaluru and Kolkata, while Pune witnessed a notable increase in its contribution to absorption, signaling a shifting dynamic in the sector.
Overall, the strong performance of India's industrial and logistics sector in the first quarter of 2024 underscores growing confidence in the country's economic prospects, driven by sustained demand and strategic investments.
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