Southern Cities Continue To Drive Demand For Logistics

Southern Cities Continue To Drive Demand For Logistics

Southern Cities Continue To Drive Demand For Logistics; Chennai Remains Among The Preferred Cities In H2 2017

Chennai, February 20, 2018: CBRE South Asia Pvt. Ltd, India’s leading real estate consulting firm, today announced the results of its latest India Industrial and Logistics MarketView: H2 2017. According to the report, Chennai remained a preferred city for Industrial and Logistics space. The northern micro markets accounted for about 25% of the leasing activity, which was largely driven by 3PL and FMCG occupiers during H2, 2017. The Western Industrial Belt in Chennai continued to dominate leasing activity, followed by the northern and southern micro markets. Close to 1.0 million sq. ft. of new supply entered the market in the form of several medium-to-large-size developments.

Across India, leasing activity in the logistics and warehousing segment across India registered a half yearly growth of 50% during the H2, 2017 period, to touch 10 million sq.ft., signaling that the short-term disruptions caused by the Goods and Services Tax (GST) have abated. Demand for logistics and warehousing space was largely concentrated in Bangalore (39%), Delhi-NCR (20%) and Chennai (13%). The only other city to witness sizable demand was Mumbai (9%). Smaller cities such as Kolkata, Ahmedabad, Hyderabad and Pune, collectively accounted for 19% of the demand. During H2, 2017, space take-up was dominated by 3PL, engineering and manufacturing, FMCG and e-commerce companies.

On a half-yearly basis, all cities reported an increase in absorption activity, except Mumbai and Chennai, which saw a marginal drop. During the review period, the average size of space take-up increased from approximately 65,000 sq. ft. in H1 to approximately 85,000 sq. ft. in H2 2017. The number of large-sized transactions (exceeding 200,000 sq. ft.), increased at a +50% rate in the latter half of the year.

Anshuman Magazine, Chairman, India and South East Asia, CBRE said, “With the government’s granting infrastructure status, the logistics sector in India is expected to see increased activity in the near future. The implementation of the Goods and Services Tax (GST) will lead to significant structural changes in operation dynamics, with enhanced focus on supply chain efficiencies. This will further enable consolidation of warehouses and entry of credible, pan-India players, consequently enabling increased FDI inflows.”

Commenting on the sector, Jasmine Singh, Executive Director – Advisory & Transaction Services, India, CBRE said, “Going forward, two factors are expected to drive demand across the country: consolidation and expansion by existing players, and the entry of new players. As India’s warehousing sector moves towards a more systematic mode of operation, coupled with the implementation of GST, we expect to see foreign participation in the Indian logistics market as well as increased inflow of institutional funding and more formal sources of capital. With growing demand for better warehouses, we will also see the development of technologically advanced warehouses across the country.”

Additionally, rents across all micro-markets in most cities remained stable during the review period. The only exception were the Southern and Eastern corridors of Hyderabad which witnessed an appreciation of about 4–6% owing to sustained demand and regular enquiries from various occupiers.

Other City Highlights – H2, 2017


* Leasing activity grew by about 40% compared to H1 2017

* FMCG (49%) and 3PL (16%) sectors primarily drove leasing demand, followed by automobile companies (8%), electronics retailers (7%), and food and beverage players (4%)

* Demand from 3PL companies dropped on a half yearly basis

* Rental values across the micro-markets of Delhi and Kundli remained stable


* Leasing activity declined marginally in Mumbai vis-à-vis H1, 2017

* The micro-markets of Panvel and Bhiwandi led the leasing activity