3PL Dominates Leasing: CBRE Report Reveals Industrial & Logistics Trends for H1 2024

CBRE South Asia Pvt. Ltd.'s report highlights the leading role of third-party logistics (3PL) in the Industrial & Logistics sector, capturing 40% of leasing in H1 2024. With significant contributions from E&M and FMCG sectors, the report anticipates a resurgence in leasing activity in the latter half of the year.

CBRE South Asia Pvt. Ltd. has unveiled its 'CBRE Industrial & Logistics Figures H1 2024' report, showing that third-party logistics (3PL) companies dominated Industrial & Logistics (I&L) leasing, accounting for 40% of total absorption in early 2024. Engineering & Manufacturing (E&M) firms followed with an 18% share, while FMCG companies contributed 10%.

Despite a 16% decline in new supply, with 15.5 million sq ft added in H1 2024, cities like Chennai, Bengaluru, and Mumbai contributed 57% of the total supply. Larger developers backed by institutional investors accounted for about 33% of this supply. Chennai, Delhi-NCR, and Pune led in project completions. The report suggests that 3PL will remain dominant as retail, e-commerce, and manufacturing sectors outsource inventory and delivery capabilities to cut costs and reduce lead times. E&M firms are also expected to play a significant role, bolstered by the government's efforts to strengthen domestic manufacturing capabilities.

From January to June 2024, I&L leasing across eight cities moderately declined to 16.6 million sq ft. However, leasing activity is expected to rebound in the second half, driven by new market entrants, increased inquiries, high-quality supply, and finalization of pending deals, particularly in the 3PL, retail, and FMCG sectors. Anshuman Magazine, Chairman & CEO of CBRE India, Southeast Asia, Middle East & Africa, said, 'The Indian I&L sector is poised for significant growth, with strong indicators for the latter half of 2024. While the first half saw smaller transactions, the market's fundamentals remain strong.'

Magazine added, 'A resurgence in leasing activity is anticipated, driven by varied sector demand, new market players, and high-quality supply availability. These factors contribute to an optimistic outlook for the I&L sector.' In Pune, IndoSpace invested USD 84 million in collaboration with the Maharashtra Government, while Chennai's CapitaLand struck a USD 32 million deal with Casagrand in H1 2024.

Bengaluru, Delhi-NCR, and Kolkata together accounted for 58% of the total I&L space uptake in early 2024, showing more space absorption compared to the same period in 2023. Ram Chandnani, Managing Director, Advisory & Transaction Services, CBRE India, said, 'The I&L sector is gaining momentum, bolstered by a resilient economy and proactive policies.'

Chandnani added, 'Government initiatives, including the Production Linked Incentive (PLI) scheme, will foster domestic occupier interest and attract institutional investors. Increasing focus on ESG and sustainable facilities will further drive demand across industries.' Leasing activity is expected to pick up in the year's second half, supported by new entrants, increased inquiries, and robust demand across sectors.

3PL players are expected to maintain leasing leadership as firms seek to optimize storage and delivery costs. Government policies promoting domestic manufacturing will boost E&M firms' space take-ups. Retail and FMCG sectors are likely to see increased activity during the festive season. Despite the H1 2024 supply decline, organized players and institutional investors are expected to expand, with investment-grade supply likely reaching 55% by year's end.