India, 2024: The industrial and logistics sector demonstrated remarkable resilience in Q3 2024, achieving an impressive absorption of 17.5 million square feet—up from 11.4 million square feet in Q3 2023, according to the latest report by Savills India, a global real estate advisory firm. This represents a substantial Y-o-Y increase of 53.5%, solidifying India’s status as a burgeoning hub for industrial and logistics operations. Tier I cities led the charge in absorption, accounting for 14.0 million square feet (80%) of the total, while Tier II and III cities contributed 3.5 million square feet (20%).

This growth was driven primarily by sustained demand from the third-party logistics (3PL) sector, which comprised 38% of total absorption, alongside manufacturing at 16%. Notably, there was a sharp rise in demand from the fast-moving consumer goods (FMCG) and fast-moving consumer durables (FMCD) sectors, contributing 17%.

In addition to strong absorption rates, the sector witnessed a fresh supply of 19.3 million square feet in Q3 2024, reflecting a 9% year-on-year growth compared to Q3 2023. Tier I cities accounted for the majority of this supply, with 16.4 million square feet (85%), while Tier II and III cities contributed 2.9 million square feet (15%).

Grade A spaces accounted for 54% of the total absorption, reflecting changing occupier preferences, especially toward sustainable and ESG-compliant spaces.

“Demand continues to chase high-quality supply for both factory buildings in manufacturing and distribution facilities in warehousing. This asset class is outpacing others, growing at a CAGR of approximately 17% over a three-year span. Businesses are redefining their strategies towards value creation and growth, particularly in sectors like FMCG, FMCD, EV & auto, electronics, defense, and apparel, which are experiencing increased demand. The logistics services sector, supported by 3PL companies, is fulfilling the majority of sectoral requirements in addition to their planned consolidation and business needs. Urban logistics, specifically quick commerce, is emerging as the “new kid on the block,” with many e-commerce companies piloting models to gain market share by implementing the “just-in-time” approach similar to contract manufacturers. In summary, India continues to shine, backed by the government’s PLI scheme, infrastructure developments, and various policies that support the manufacturing and logistics sectors,” explained Srinivas N., Managing Director of Industrial and Logistics, Savills India.

Delhi-NCR emerged as the top performer, contributing 22% of the total supply and 17% of the absorption, followed by Bangalore with 18% of the supply and Kolkata and Chennai are each at 12%. The 3PL, FMCG/FMCD, and manufacturing sectors collectively drove 71% of the total demand, underscoring the strength of these industries in the market. The e-commerce sector contributed 8% to the overall demand.

Looking forward, significant expansion is anticipated within the industrial and logistics sectors, bolstered by a favorable demand environment and proactive government initiatives. In 2024, manufacturing and warehouse space absorption is projected to exceed 60 million sq. ft., with supply expected to surpass 65 million sq. ft.

Furthermore, Tier II and III cities are set to emerge as crucial hubs for sourcing, consumption, and distribution, driven by substantial growth opportunities. The 3PL and manufacturing sectors will continue to propel demand, along with a heightened requirement for FMCG/FMCD spaces. Additionally, the e-commerce sector is gearing up for increased activity as it enhances its urban distribution networks and extends its presence into Tier II and III cities, including Guwahati, Bhubaneswar, Patna, Hosur, Coimbatore, and others.