Delhi’s Q1 gross industrial absorption hits 1.1 million sq ft

Demand was driven by the 3PL and retail sectors.

According to a recent JLL report, warehousing demand remained growth-oriented with net absorption of 0.66 million sq ft and gross absorption of 1.1 million sq ft in 1Q23. Logistics/3PL and Retail sectors continued to be the key demand drivers, contributing 70% of the demand in the quarter.

“Consistent preference from occupiers towards good-quality, compliant spaces has resulted in higher demand for prime Grade A warehouses, resulting in more than 50% of the net demand in 1Q23 being recorded in such quality spaces,” the report said.

Here’s more from JLL:

New supply of 0.75 million sq ft was added in the quarter, comprising both Grade A and Grade B projects, with Delhi – NH8 and Sonipat – Hassangarh submarkets contributing over 95% of this new supply. 

The vacancy rates have remained stable in the quarter at 17.6% with comparable supply and net demand. Increasing demand for Grade A spaces has reduced its vacancy by 30 bps q-o-q.

Surge in rents at 11.8% y-o-y due to increasing demand for Grade A

The strong demand for Grade A warehousing space, consistent vacancy rates, and limited supply have resulted in a significant 11.8% y-o-y increase in rents overall. This rent surge is expected to continue in the upcoming years, primarily due to increasing investments from institutional investors and developers and increased preference from occupiers to lease such spaces.

The demand for specialised facilities with higher operational efficiency is increasing from large 3PL companies such as Yusen Logistics and Ecom Express, as well as retail companies such as Reliance and Lifestyle. These two sectors have been influential in driving up rents over the quarter.

Outlook: Grade A demand & supply to cross 5 million sq ft in 2023

New supply of more than 5 million sq ft is expected to be added in the Grade A space in the remaining quarters of 2023, mainly from institutionally-backed projects such as IndoSpace, Ascendas and Blackstone. Delhi – NH8 submarket is anticipated to remain the most active market in Delhi with high projected supply and demand, followed by Sonipat – Hassangarh.

With the strong demand from 3PL and Retail sectors for Grade A warehouses, Grade A vacancy is projected to reduce and reach close to 5% by year-end of 2023. 

Note: Delhi Logistics & Industrial refers to NCR Delhi's overall Grade A and Grade B warehousing & light manufacturing market.