'Leasing of warehousing space at 51.32 mn sqft; Chennai lags behind'

CHENNAI: Warehousing volume transactions of Chennai was 4.5 mn sq ft in FY 2023, as per the latest ‘India Warehousing Market Report – 2023’ of Knight Frank.

Warehousing leasing edged up to a record 51.32 million square feet last fiscal across eight cities on a strong demand from third-party logistics and retail sectors. The data for warehousing demand includes industrial space for light manufacturing/assembling.

With respect to industry-split of transaction volume, 3PL constituted to the biggest demand driver for warehouses. The sector accounted for 44% share of the region’s warehousing transactions, followed by manufacturing and FMCD at 24% and 17% respectively in FY 2023. The need for vendor and inventory management, changing consumer behaviour, and supply chain visibility have all prompted businesses to outsource their logistics needs, which has fuelled the expansion of 3PL players.

Transaction activity in the Chennai market has been resilient with the 3PL sector having the largest share in the occupier transaction pie. Overall, transactions have declined by 11% YoY. But, despite this dip during the current year, they are still higher than any other previous period except FY 2022. Chennai, due to its proximity to the sea, is perceived as a desirable base for heavy industries.

With respect to cluster split of transactions, the Sriperumbudur- Oragadam area dominated with the highest share of warehousing transactions. The region accounted for 50% of the total transacted volume during FY 2023. This cluster, well-known for manufacturing, serves as the main hub for the automotive and its ancillaries production industries. The NH 16/GNT Road-Periyapalayam accounted for 37% of all the warehousing transactions in Chennai. Maraimalai Nagar accounted for 13% of all the warehousing transactions in Chennai during FY23.

Demand from the 3PL and manufacturing sectors is expected to grow considering the centre’s focus on growing India’s manufacturing and industrial base. Chennai’s well-established automobile and industrial foundation positions it well to capitalize on this macro-trend. Hyundai’s recent announcement of a Rs 20,000 cr investment is one such prominent example of a large-scale investment. Demand for warehousing will be augmented with the availability of a conducive physical infrastructure and the connectively needed across major locations in and around the city and state, as per a release.

Shishir Baijal, CMD, Knight Frank India said, “Growth is not limited to the top eight markets but has also extended to secondary markets, supported by enhanced infrastructure such as highway networks, rail systems, and air transportation. Indeed, there has been a noticeable shift in the occupier groups within the warehousing market.”