Remarkable warehousing demand in 2023

• The demand for warehouse space in 2023 has surpassed that of the previous year, with a notable net absorption of 6.86 million sq ft, while overall space take-up was 10.7 million sq ft. Notably, the Delhi – NH8 and Ghaziabad – Noida submarkets experienced the highest levels of absorption.
• The primary catalyst for the demand was the 3PL/Logistics sector, accounting for a 35% share during 2023, followed by Electronics & White Goods, Retail and Auto & Ancillary sectors. Occupiers consistently favoured high-quality, compliant spaces, resulting in greater demand for Grade A warehouses which was more than 50% of the overall net demand in 2023.

Grade A vacancy dips to 4.4% with high demand

• In 2023, the warehouse market of NCR Delhi witnessed an increase of 8.23 million sq ft in warehouse space, encompassing both Grade A and Grade B projects. Delhi – NH8 emerged as the region with the highest addition of new supply, followed closely by Ghaziabad – Noida.
• Vacancy rates saw a slight decline, reaching 17.5% in 2023. This can be credited to the robust demand for warehouse space, which outpaced the rate of new supply. Notably, the demand for Grade A space has been exceptionally strong, leading to a decrease in Grade A vacancy rates from 6.8% in 2022 to 4.4% in 2023.

Rents on the rise with 5% y-o-y growth

• Significant growth in rental prices, rising by 5% y-o-y, has been fuelled by a robust demand for warehousing space, maintaining stable vacancy rates amidst limited supply, and a notable upswing in land prices. This upward trend is expected to continue moving forward, primarily driven by increased investments from institutional investors and developers.
• Prominent 3PL companies such as Mahindra Logistics, Delhivery, Rhenus Logistics, Stellar SCS, along with retail giants including Vishal Mega Mart and Reliance, have been major contributors to the rental growth witnessed in 2023. These sectors are increasingly occupying specialised facilities that offer enhanced operational efficiency.

Outlook: Warehousing sector set to expand in 2024

• The warehousing sector in NCR is set to witness significant growth, with the stock projected to reach 98 million sq ft by 2024. It will primarily be fuelled by the new supply in Grade A projects, supported by institutional investors including Indospace, Ascendas, Blackstone, and ESR. The submarket of Delhi – NH8 is expected to maintain its strong momentum, closely followed by Ghaziabad – Noida.
• The warehousing demand in NCR Delhi is notably influenced by various proposed infrastructure initiatives such as the DMIC, WDFC, and EDFC freight corridors. These projects aim to significantly enhance freight connectivity between Delhi and other regions in the West and East of India. With the increasing demand, vacancy rates are foreseen to remain around 15% over the next four years.