APPD Market Report Article


September 4, 2023

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


INR 21.1


Gross absorption of 1.67 million sq ft; 50% contribution by 3PL

  • The warehousing demand has shown sustained growth in 2Q23, with net absorption of 1.40 million sq ft while gross absorption stood at 1.67 million sq ft. Delhi – NH8, being the oldest and largest warehousing cluster, experienced the highest absorption, followed by Ghaziabad – Noida.
  • The primary driver of demand in Q2 was 3PL/ Logistics, accounting for 50% of the total space take-up in Q2, with FMCG and Retail also being significant contributors. There is sustained occupier preference for high quality, compliant spaces, leading to increased demand for prime Grade A warehouses, which constituted over 65% of the net demand in the quarter.

Institutionally-backed projects comprise 85% of new Grade A supply

  • In Q2, there were new additions totalling 1.42 million sq ft of warehousing space across Grade A and Grade B projects. Notably, within Grade A, over 85% of the new supply was observed in institutionally backed projects. 
  • The overall vacancy rate declined to 16.9% in the quarter due to robust net demand surpassing the new supply. The rising demand for Grade A space has led to a year-on-year reduction of 160 bps in Grade A vacancy.

High demand and institutional investments drive rent surge

  • The robust demand for Grade A warehousing space, paired with stable vacancy rates, limited supply and a notable 7% y-o-y increase in land rates, has led to a significant growth of 9.6% in rents on a y-o-y basis. This upward trend is anticipated to persist in the coming years, primarily driven by growing investments from institutional investors and developers.
  • Large 3PL companies like Delhivery, Kuehne Nagel, and DHL, as well as FMCG and Retail companies such as Britannia, Drools, and Coats, are actively seeking specialised facilities with enhanced operational efficiency, making these sectors the primary drivers of rental growth in the quarter.

Outlook: Proposed infra push supports projected demand in 2023

  • In 2023, there is an expected addition of over 6 million sq ft of new supply, particularly in projects supported by institutional investors such as Indospace, Ascendas, Blackstone and ESR. The Delhi – NH8 submarket is expected to remain highly active with a significant supply pipeline and robust demand projections.
  • The projected demand is expected to reach 6.5 million sq ft in 2023, driven by infrastructure proposals such as Delhi-Mumbai Industrial Corridor, Western and Eastern Dedicated Freight Corridors—both enhancing India’s freight connectivity. The proposed Western and Eastern peripheral expressways should further aid in boosting demand across all major segments.

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

Talk to us 
about real estate markets.