APPD Market Report Article

Delhi

May 26, 2024

Chandranath Dey, Head - Operations, Business Development, Industrial Consulting & Integrated Logistics - Logistics & Industrial, India

6.8%

INR 22.0

Rents
Rising

Steady demand with 2.18 million sq ft gross absorption

  • In Q1 2024, the warehousing space demand has remained consistent as compared to the previous year, which can be seen in the net absorption of 0.94 million sq ft and gross absorption of 2.18 million sq ft. Among the different submarkets, Delhi – NH8 experienced the highest levels of absorption.
  • The primary driver behind this demand was the 3PL/Logistics sector, which accounted for 45% of the total demand, followed by Electronics & White Goods, Auto & Ancillary, and E-Commerce sectors. Occupiers are consistently preferring high-quality, compliant spaces, resulting in an increased demand for prime Grade A warehouses, which accounted for almost 90% of the net demand during Q1 2024.

Market observes new supply surge, vacancy rates edge upward

  • In the quarter, the warehousing market saw a total addition of 1.69 million sq ft, encompassing both Grade A and Grade B projects. The highest influx of new supply was observed in Delhi – NH8, followed by Ghaziabad – Noida.
  • During the quarter, vacancy rates experienced a slight increase, reaching 18.1%. Notably, the speculative supply of Grade A space surpassed the demand for Grade A space, resulting in an increase in Grade A vacancy rates from 4.5% in Q4 2023 to 5.8% in Q1 2024. This vacant space is expected to be absorbed in the subsequent quarters.

Surge in rents as Grade A segment attracts institutional investors

  • The robust demand for Grade A space, along with steady vacancy rates and increased interest from institutional developers/investors, has led to a significant 7% y-o-y rise in rental prices. This upward trajectory in rents is projected to persist in the coming years, primarily driven by heightened investments from institutional investors and developers who recognise the market segment’s potential.
  • During the quarter, growth in rents was notably spurred by the concentration of activities in large institutionally-backed projects, such as Indospace Badli, Horizon Industrial Parks and LOGOS.

Outlook: Strong growth as stock to reach 98 million sq ft by 2024

  • Looking ahead to 2024, the total warehousing stock in NCR is projected to reach 98 million sq ft, primarily driven by new supply in Grade A projects. Notable institutional investors such as Indospace, Ascendas, Blackstone, and ESR are expected to contribute to this growth. The Delhi – NH8 submarket is expected to remain highly active, followed closely by Ghaziabad – Noida.
  • Proposed infrastructure projects such as Freight Corridors (DMIC, WDFC, and EDFC) are expected to play a significant role in influencing warehousing demand in NCR Delhi. These projects will enhance freight connectivity between Delhi and other regions in the West and East of India. As demand increases, vacancy rates are expected to hover around 15% over the next four years.

Note: Delhi Logistics & Industrial refers to NCR Delhi's overall Grade A and Grade B warehousing & light manufacturing market.

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