The Industrial and warehousing sector reached an unprecedented high in 2024, with demand and supply both hitting new milestones. Absorption surged by 30 per cent year-on-year (YoY) to reach 64.5 million sq. ft., while fresh supply recorded a 15.8 per cent YoY growth, totalling 71.8 million sq. ft., according to Savills India, a leading global real estate advisory firm.

Driven by sustained demand

This growth was driven by sustained demand from the 3PL and manufacturing sectors, along with a significant uptick in interest from the fast moving consumer goods, fast moving consumer durables, and e-commerce segments. Tier-I cities dominated absorption, accounting for 77 per cent of the total, with Tier-II and Tier-III cities contributing the remaining 23 per cent, according to a report by international real estate advisory firm Savills India.

On the supply front, the sector delivered 71.8 million sq ft, with Tier-I cities contributing a substantial 56.8 million sq. ft. (79 per cent) and Tier-II and Tier-III cities adding 15 million sq ft (21 per cent). This robust delivery across cities reflects the market’s alignment with growing demand

Over the past 3-4 years, the demand for compliant Grade-A spaces has risen significantly, driven by shifting occupier preferences to align with ESG standards. As a result, Grade-A supply increased to 55 per cent in 2024, up from 53 per cent in 2023.

The absorption in 2024 was primarily led by sustained demand from the third-party logistics (3PL) sector, which comprised 33 per cent of total absorption, alongside manufacturing at 22 per cent. Notably, there was a significant rise in demand from the FMCG & FMCD sectors, contributing 16 per cent in 2024 up from 6 per cent in 2023, derived from increasing demand for FMCG and FMCD products in Tier- I, II & III cities, as well as rural markets.

Tier- I cities include Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, Delhi-NCR and Pune. Tier-II & Tier III cities include Guwahati, Bhubaneshwar, Patna, Hosur, Coimbatore, Rajpura, Lucknow, Jaipur, Nagpur, Surat, Indore, Kochi, Hubli, Vizag, Belgaum and Anantapur, the report said.

E-Commerce gains traction

The E-commerce segment is gaining traction, with contribution to overall absorption increasing to 10% in 2024 from 4% in 2023. The Tier-II & III cities like Coimbatore, Lucknow, Patna, Guwahati, and Indore contributed significantly to the overall absorption. E-commerce sector contribution to overall demand continues to increase, with a significant portion of demand originating from Tier-II & III cities as the sector extends its presence into Tier-II & III cities.

“We anticipate significant growth in the industrial and logistics sector, driven by increasing demands from the manufacturing sector. Additionally, Tier-II and Tier-III cities are certain to become key hubs for sourcing, consumption, and distribution, supported by substantial growth opportunities. We expect both supply and absorption to surpass 75 million sq. ft. in 2025 pan India,” said N Srinivas, Managing Director, Industrial and Logistics, Savills India.

Delhi-NCR leads

In 2024, Delhi-NCR maintained its lead, contributing 19 per cent to the total supply, followed by Mumbai and Bengaluru, each with 13%. Tier-II and Tier-III cities together accounted for 21 per cent of the total supply. In terms of absorption, Delhi-NCR again led with 15%, followed by Mumbai at 13 per cent, and Bengaluru at 12 per cent. Tier-II and Tier-III cities collectively contributed 23 per cent of total absorption, the report said.