In terms of rental growth year over year (YoY), the Asia-Pacific (APAC) logistics industry had a 10.4% increase, according to Knight Frank’s Asia-Pacific Logistics Highlight H1 2023 report. In terms of warehouse rent increase in the first half of 2023, the important Indian cities Bengaluru and Delhi-NCR solidified their positions to stay among the top 10 APAC markets, with Mumbai coming in at number 11.
In the first half of 2023, rents rose in 15 of the 17 cities being monitored. The financial year is referenced in the data for Indian markets.
Indian warehouse industry
The three major Indian storage markets are still seeing near-record levels of demand. As vacancies shrank quickly over the last six months, lease transaction volumes increased significantly in Mumbai and Bengaluru.
Despite having started out on a strong platform in the previous quarter, activity in Delhi-NCR somewhat decreased. Due to persistent demand and rising input prices, rents increased in the first half of 2023.
Despite a decline in e-commerce demand, manufacturing and 3PL firms have filled the void. The e-commerce business is anticipated to make a rebound once surplus capacity amassed during the pandemic are consumed, nevertheless, since consumer demand continues to be robust.
According to yearly rental growth, Bengaluru is ranked sixth in the APAC logistics sector. When compared to the previous year, rent in the city increased 7.5% YoY to Rs 21.50 per square foot per month. The percentage of vacant housing is a respectable 15.8%, down from the previous 28.2%.
In the APAC logistics market, Delhi-NCR is ranked eighth based on yearly rental growth. The city’s rentals increased 6.6% YoY from Rs 19/sq ft/month to Rs 20.20/sq ft/month. The current vacancy rate, which is 9.7%, has fallen to single digits in the most recent quarter.
Regarding yearly rental growth, Mumbai is ranked 11th in the APAC logistics industry. The country’s most costly storage market is in Mumbai. The city’s rates have increased by 4.2% YoY to Rs 23.06 per square foot per month from Rs 22. Additionally, the percentage of open positions has drastically decreased from 14% to 10.3%.
The survey, which monitored prime logistics rent across 17 important cities in APAC, revealed an average increase in rental prices of 10.4% year over year, driven by the acceleration of rental growth in Manila. Despite the enormous economic difficulties that existed at the same time, this growth persists.
Resilient demand from manufacturers, third-party logistics (3PL) companies, and e-commerce companies contributed significantly to the total increase.
The majority of Southeast Asian cities studied for the survey had constant or rising rents, with Manila registering the largest annual rental rise in Asia-Pacific at 49.3%, driven by enduring e-commerce demand.
Leasing activity in the area was driven by the preference for institutional-grade facilities in key regions and last-mile sites, and the China+1 strategy also saw continuous expansions by significant manufacturers in Southeast Asia.
Limited supply, particularly along the Eastern Seaboard, contributed to Australasia’s broadly based rental rise as vacancy rates remained at record-low levels.
Despite reaching a peak in the development cycle in 2023, when each of the three major markets expected an estimated 800,000 to 900,000 sq m of new supply, more than 50% of the pipeline was already pre-committed. As a result, it is anticipated that the undersupply situation in the markets of Australia and New Zealand will persist.
According to Shishir Baijal, chairman and MD of Knight Frank India, “The Indian warehouse industry has been a standout success in particular. The amount of transactions in FY23 is on par with the previously unheard-of levels in FY22. In addition to increased demand from the industrial and 3PL sectors, the market is anticipated to see a recovery in demand from the e-commerce industry in the next months.
“Long-term structural fundamentals also continue to underpin demand in emerging Southeast Asia markets, alongside India, which is progressively gaining significance within the global manufacturing supply chain,” said Christine Li, head of research at Knight Frank Asia-Pacific. Overall, while e-commerce demand continues to adjust to a new cycle in the post-pandemic climate, which will last through the second half of 2023, the region’s logistics industry is still in adjustment mode.