In H1 2023, the industrial and warehousing sector recorded a total absorption of 22.4 million sq. ft., indicating a 7% increase compared to the 20.9 million sq. ft. absorbed in the first half of 2022. Tier I cities accounted for 75% of the total absorption in the first half of 2023, while tier II and III contributed remaining 25%. The industrial and warehousing sector also witnessed a new supply of 27.4 million sq. ft. during the same period, reflecting a 36% growth from the 20.2 million sq. ft. recorded in the first half of 2022, according to the latest research by Savills India, an International real estate advisory firm.
The demand for Grade A warehousing and ready fitted-out factory space has seen a substantial surge in recent years. This surge can be attributed to several emerging trends such as the emphasis on quality and compliance, as well as changing occupier preferences to meet ESG (Environmental, Social, and Governance) standards. Consequently, there has been a consistent rise in the proportion of Grade A space demanded across cities. In the first half of 2023, Grade A space accounted for 53% of the total absorption in the country, marking a significant increase from 36% in the first half of 2022.
Tier II and III cities are witnessing significant growth as prominent hubs for sourcing and consumption, easing distribution. As a result, these cities witnessed a notable 22% year-on-year growth in absorption, increasing from 4.1 million sq. ft. in the first half of 2022 to 5.0 million sq. ft. in the first half of 2023. Among the Tier I cities, Mumbai emerged as the leading city with the highest absorption accounting for 18% of the total absorption in the country. It was closely followed by Delhi-NCR with 14% and Pune with 10%. Bengaluru and Chennai recorded an absorption of 9% each.
