Industrial and logistics sector leasing stood at 19.1 million sq. ft across eight cities in January-June 2023

CBRE South Asia Private Limited, India’s leading real estate consulting firm, announced the findings of its latest report, ‘CBRE Industrial & Logistics Figures H1 2023’. The report highlights a 35 per cent year-on-year (y-o-y) surge in total leasing in industrial and logistics (I&L) sector, which stood at 19.1 million square feet (sq. ft.) across eight cities during January-June 2023 period. The leasing activity is expected to sustain its momentum in the July-December 2023 period, which is expected to be partly driven by festive season sales observed across the country.


Delhi-National Capital Region (NCR), Mumbai, and Chennai led the leasing activity during the January-June 2023 period, accounting for a 60 per cent share in the total leasing. All cities, barring Bangalore, demonstrated an uptick in I&L leasing compared to the corresponding period last year.

A significant surge in supply was recorded, marking a 78 per cent y-o-y increase, and stood at 17.7 million sq. ft. during January-June 2023. This boost was primarily due to the completion of pent-up supply in a few cities. The overall supply was led by Chennai, Kolkata, and Mumbai, which collectively accounted for over half of the total project completions. Large developers, supported by institutional funds, contributed to a share of about 39 per cent of the supply during this period. Delhi-NCR, followed by Chennai and Hyderabad, accounted for more than two-thirds of such project completions.

During January-June 2023, third-party logistics (3PL) players led the leasing activity with a share of 43 per cent. Space take-up by the sector was led by occupiers from e-commerce, retail and manufacturing players outsourcing their supply chain processes to 3PL firms to fulfil their storage needs, achieve greater flexibility, reduce costs and avoid difficulties in sourcing labour.

E-commerce and retail companies accounted for approximately 9 per cent share each in leasing. The leasing landscape also witnessed contributions from other sectors, including auto & ancillary (7 per cent), FMCG (6 per cent), and electronics and electricals (5 per cent).

Space take-up was dominated by small–sized transactions (<50,000 sq. ft) with a share of about 44 per cent in January-June 2023. The share of medium-sized transactions (50,000 – 100,000 sq. ft) and large-sized (more than 100,000 sq. ft) deals were about 24 per cent and 32 per cent respectively during January-June 2023. Delhi-NCR, followed by Mumbai and Chennai, dominated large-sized deal closures, together accounting for a share of about 65 per cent of such deals. From a sectoral perspective, 3PL, followed by engineering & manufacturing and retail firms, drove large-sized deal closures and accounted for a cumulative share of about 70 per cent.

Rental values increased on a half-yearly basis in key micro markets across cities, except Mumbai and Kolkata. Rents in Mumbai remained stable on a half-yearly basis in January-June 2023, while Kolkata witnessed a marginal dip of 2-3 per cent on a half-yearly basis owing to excess supply addition in the market.

Anshuman Magazine, chairman and CEO – India, South-East Asia, Middle East and Africa, CBRE, said, “The second half of the year foresees a consistent influx of leasing activities, paving the way for an estimated 32-36 million sq. ft. uptake of I&L space in 2023. This growth trajectory will be predominantly propelled by the 3PL sector as they continue to implement a ‘multipolar’ supply chain strategy. The space take-up by engineering & manufacturing firms is also expected to remain strong led by the persistent endeavours of the government to enrich the investment landscape, attracting both global and domestic manufacturers to establish operations within India.

In addition, we anticipate increased interest from FMCG, retail, and electronics & electrical firms, attributed to the surging consumer demand. Furthermore, a slight improvement in e-commerce leasing sentiments is on the horizon, fuelled by the forthcoming festive season sales nationwide.”

Ram Chandnani, managing director, advisory and transactions services, CBRE India, said, “Driven by the completion of pent-up projects in the first half of 2023, the supply addition is projected to reach approximately 26-30 million sq. ft. by year-end, a significant increase from the 21 million sq. ft. completed in 2022. Furthermore, we anticipate that larger developers supported by institutional funds will continue to play a more prominent role in project completions, with their share expected to touch about 40 per cent in 2023 compared to 33 per cent in 2022. Additionally, in response to the growing demand in tier-II cities, developers are likely to explore investment opportunities in these emerging logistics nodes by acquiring land banks in proximity to new infrastructure initiatives.”

Key Trends – 2023

  • ESG Compliance becoming a necessity: With the rising need to reduce carbon emissions, ESG plays a significant role in the I&L sector as more corporates are committing to decarbonisation and CO2 Sustainability measures are likely to be primarily undertaken by the Grade A developers both in warehouse construction and operations in order to reduce emissions and enhance efficiencies.
  • Rental growth to continue in most cities: Led by flight-to-quality leasing, increasing investment grade supply and rising land and inputs costs, the I&L rents are likely to continue to grow in key micro markets across most cities. Cities such as Mumbai, Chennai, Bangalore, Pune, Hyderabad, and Ahmedabad are expected to witness about 2-6 per cent Y-o-Y growth in rents by the year-end, especially in investment grade, tech-enhanced and strategically located assets.
  • Tier-II cities the next growth frontier: Rising urbanisation, increase in per capita income, supply chain revamp after the pandemic, and e-commerce penetration in tier-II cities are likely to further boost the I&L sector activity in these emerging markets. The top ten tier-II cities in India house about 50 million sq. ft of I&L stock as of H1 2023 and is likely to touch 75 million sq. ft. over the next three-four years.
  • Government policy interventions to reinforce growth: The government’s holistic approach to transform the logistics sector and to boost the manufacturing activity through various policy enablers is likely to highlight India as a bright spot for global investments, especially for the companies focusing on China+1 strategy. The government’s focus on a comprehensive logistics action plan, interconnected infrastructure, digital transformation and creation of a skilled ecosystem are expected to improve logistics efficiencies and reduce costs across the supply chain.