Stock, Absorption & Rental Values for Warehousing Space in Top 8 Cities of India
Delhi NCR, Mumbai, and Bangalore account for 60% of top eight market absorption and the same trend is expected to continue; Tier 2 locations are expected to generate demand of 25% of the gross absorption of India market
- The eight prime markets of India held an estimated 252 mn sqft of warehousing stock at the end of H1 CY 2021. The Mumbai & Delhi NCR market accounts for 40% of this stock. The larger warehousing markets of Mumbai and Delhi NCR have a significantly lower proportion of Grade A warehouses as they are much older markets and the bulk of their stock had been built before the demand for Grade A warehousing gathered momentum. Bangalore, Pune, and Chennai have the higher levels of Grade A stock due to their primary demand base of ecommerce, auto and auto ancillary occupiers.
- Prominent cities or Tier 2 markets that are witnessing increased warehousing developments are Guwahati, Coimbatore, Bhubaneshwar, Lucknow, Visakhapatnam, Kochi, Vapi and Surat. Annual demand in these markets have grown significantly; from a share of 10% in 2015 the absorption in these markets have grown to 20% of the total demand across top 8 markets in the year 2020. We expect this trend to continue, and tier 2 locations will have a share of 25% of the prime markets in next few years.
- Absorption is likely to grown between 18% and 22% annually for most of the markets. Rental escalations for Grade A space are expected to be between 4% and 6% and 3% to 5% for Grade B spaces in the coming three years.