Leasing activity to stay strong in India: CBRE report

While Mumbai, Delhi-National Capital Region (NCR), Bengaluru and Chennai would continue to drive transaction activity during the year, markets like Ahmedabad and Pune could also witness improved leasing volumes, it noted.

The absorption is expected to be dominated by key sectors such as third-party logistics (3PL), engineering & manufacturing and retail.

Limited infrastructure capabilities have led occupiers to opt for the cost-effective services provided by 3PL players, a trend that is expected to continue this year as well, the report, titled ‘India I&L Outlook 2024’, noted.

While leasing activity in the e-commerce sector remained muted in 2023, a complete recovery is likely to be witnessed by the end of this year, it said.

The general upswing in manufacturing activity due to government schemes and the positive impact of infrastructure development and deepening internet penetration have led to a surge in digital buying decisions. These factors are likely to lead occupiers to increase their focus on upgradation and expansion opportunities in tier-I cities and extending local distribution networks in emerging logistics hubs, CBRE noted.

While supply reached a historic peak in 2023, the completion of new warehousing projects could witness a marginal slowdown in tier-II cities due to roadblocks like rising land costs and increased acquisition timelines.

However, capital flows from both global and local players are likely to continue for greenfield and brownfield acquisitions, with joint ventures and joint development agreement partnerships remaining the prime investment conduit for infrastructure and leasing (I&L)-focused investors.

CBRE also foresees that the share of projects completed by larger developers backed by institutional funds would continue to increase in India.

With the growing need to reduce carbon emissions, compliance to environmental, social and governance (ESG) standards continues to play a significant role in the I&L sector as more corporates commit to decarbonisation and carbon neutrality.

Investment-grade developers are likely to collaborate with occupiers to actively reduce their energy consumption levels and adopt sustainable practices in warehouse operations across India, CBRE noted.

Rising transportation costs are likely to drive players to lease more space closer to industrial hubs, consumer hubs and key transportation nodes.

Rising land and input costs, along with 'flight-to-quality' driven by occupiers seeking operational efficiencies, safety compliance, and improved contingency planning due to higher developer expertise, are likely to reshape the I&L rental landscape going forward. CBRE expects developers to recalibrate rents, especially in investment-grade, tech-enhanced and strategically located assets.

Occupiers would focus on efficient coordination and optimisation of 'first mile', 'middle mile', and 'last mile' logistics to ensure timely and cost-effective deliveries. Expanding distribution networks across new logistics hubs and key tier-II cities would facilitate proximity to a larger population and achieve relatively cheaper operational costs, the report noted.

Occupiers are increasingly focusing on warehousing facilities that offer features like high ceilings to accommodate automated stacking systems, ample loading and unloading zones, robust fire safety systems and reliable power backup provisions. Artificial Intelligence and automation are increasingly adopted to identify and address inefficiencies within warehousing operations, it added.

Fibre2Fashion News Desk (DS)