Strong growth continues: Q3 2024 net absorption at 1.95 million sq ft

• In Q3 2024, the warehouse demand rose by more than double compared to the previous year, with net absorption of 1.95 million sq ft and gross absorption of 2.88 million sq ft. Among the submarkets, Tumkur Road had the largest share, followed by Hoskote & Hosur Road.
• 3PL/Logistics and Engineering segments drove 54% of warehousing demand in Q3, along with contribution from Electronics, FMCG, and E-Commerce. Occupiers prefer high-quality, compliant spaces, with prime Grade A warehouses accounting for over 50% of net demand.

80% of new Grade A supply is in institutionally backed projects

• In the quarter, the warehouse market experienced addition of 1.92 million sq ft of space, up by 24% q-o-q. Tumkur Road emerged as the area with the highest influx of new supply, followed by Hosur Road and Hoskote – Devanahalli corridors.
• The vacancy rate dropped by 40 bps q-o-q to 10.5% in Q3. More notably, the vacancy in prime grade A spaces is considerably low at 2.2%.

Increased demand for prime Grade A spaces has pushed rents up by 3.8% y-o-y

• Rents have risen by 3.8% since the previous year on the back of increased demand, rising traction from institutional developers/ investors and a corresponding rise seen in land values.
• This upward trend in rents is expected to continue in the foreseeable future, primarily propelled by heightened investments from institutional investors and developers such as Indospace, LOGOS, Ascendas, Welspun, and NDR.

Outlook: Proposed infrastructure projects to support upcoming warehousing demand of 4.3 million sq ft in 2024

• Bengaluru’s warehousing sector is set for significant growth in 2024 and 2025, with the total stock expected to reach 53.6 million sq ft. This growth is being led by new Grade A developments, supported by key institutional investors like Indospace, Ascendas, NDR and LOGOS.
• Bengaluru’s warehousing demand is fuelled by various proposed infrastructure projects, including Industrial & economic corridors such as BMIC and CBIC. With the increasing demand, the vacancy rate is expected to remain below 8% over the next 4 years.