National – Feb 8th, 2024 – CBRE South Asia Pvt. Ltd, India’s leading real estate consulting firm, today announced the findings of its report – ‘Beyond Metros: Tier-II Cities Fuelling India’s I&L Boom’. The report highlights Industrial & Logistics(I&L) sector leasing across 8 tier-II cities stood at ~5 mn. sq. ft. during Jan-Sep 2023. These 8 cities include Chandigarh, Jaipur, Lucknow, Coimbatore, Hosur, Indore, Nashik and Vadodara. Top cities leading that led the leasing activity include Chandigarh, Jaipur, and Lucknow.
According to the report, Tier-II cities are fast emerging as the next growth frontier for the I&L sector. The total I&L stock in the 8 tier-II cities stood at about 46 mn. sq. ft. as of Sep ‘23, with Chandigarh, Jaipur, and Lucknow dominate the I&L stock of more than 6 mn. sq. ft. The total I&L supply recorded in these 8 cities was ~13 mn. sq. ft. during Jan-Sep ’23. Top cities dominating supply addition in Jan-Sep ‘23 include Chandigarh, Hosur and Jaipur.
With the appetite for quality warehousing space expected to remain strong in 2024, tier-II cities, are now witnessing increased activity in the form of world-class integrated logistics parks backed by institutional funds, new industrial parks backed by the state governments and leasing of contiguous space in investment-grade facilities by multi-national companies.
The report indicates that tier II cities like Lucknow, Chandigarh, Nashik, Hosur and Coimbatore are emerging as the central industrial corridors, with Indore, Chandigarh, Coimbatore, Lucknow, Nashik and Jaipur airports being equipped with cargo handling units. Major warehousing occupants, including Amazon, Flipkart, Nestle, and Asian Paints, have established their presence in multiple cities such as Jaipur, Lucknow, Coimbatore, Hosur, Nashik, Vadodara and Indore.
Anshuman Magazine, Chairman & CEO, India, Southeast Asia, Middle East & Africa, CBRE, said, “The Indian I&L landscape has witnessed a remarkable transformation over the last few years, encompassing not just modernized assets and innovative operational models, but also a diversification of investment destinations.
While historically, occupiers gravitated towards established tier I cities, a strategic shift is underway. Improved connectivity and infrastructure, coupled with the surging e-commerce boom, have made tier II and III cities increasingly attractive. The country’s strong consumption story from the non-metro cities, same-day deliveries and deepening internet penetration shaping digital buying decisions have further amplified the growth of warehousing facilities in these markets.
Going forward, occupiers are likely to adopt a wide range of strategies to enter and expand in tier-II cities, which would include the development of self-built assets, partnering with developers or investors to construct new assets, pre-leasing space in strategically located high-quality assets and opting for build-to-suit facilities”.
Ram Chandnani, Managing Director, Advisory & Transactions Services, CBRE India, said, “The country’s strong consumption story from the non-metro cities, same-day deliveries and deepening internet penetration shaping digital buying decisions have further amplified the growth of warehousing facilities in these markets.
Developers are increasingly eyeing emerging logistics hubs in Tier-II cities, aiming to invest in land banks near new infrastructure projects. Their focus is on building modern warehouses incorporating technology, aiming to attract high-quality leasing through advanced facilities. Last mile facilities such as micro-fulfilment centres and dark stores are also likely to support rapid deliveries in tier-II cities.
Several government initiatives at various execution stages are likely to catalyse the growth of I&L investments in tier-II cities. The Production-Linked Incentive (PLI) scheme introduced in 2020 is expected to significantly boost the prospects of India’s manufacturing sector globally, which, in turn, would drive large-scale I&L investments across both tier-I and tier-II cities”.
Top 3 I&L Markets in Tier-II cities
Chandigarh: known as ‘City Beautiful’, Chandigarh has a well-developed social, physical and industrial infrastructure. The industrial landscape of the city includes manufacturing units of agricultural equipment, auto parts, electronics, metal & alloy, engineering & manufacturing and pharmaceutical companies.
- I&L space absorption during Jan-Sep’23 stood high (> 400 ksf.), supply (> 800 ksf.), stock – high (> 6 msf.)
- Key micro-markets of Chandigarh are Rajpura, Banur- Tepla Road, Zirakpur. Rajpura, Banur- Tepla Road witnesses a predominance of PEB structures of Grade B quality and few Grade A developments. Most developers are local HNIs, while the occupiers come from sectors such as FMCG, FMCD, e-commerce, electronics, paints, etc. Zirakpur is dominated by warehousing facilities majorly catering to last mile delivery services with presence of Grade B pre-engineered assets.
- Key industrial occupiers include Hindustan Unilever, Ognibene Power, Steel Strips Wheels, International Switchgears, Swaraj Tractors
- Key warehousing occupiers in the market includes Godrej, Procter & Gamble, Godrej & Boyce, Luminous Power Technologies, DMart
- Prominent I&L spaces includes:
- Key manufacturing SEZs: Vividha Infrastructure
- Key I&L clusters: Banur – Tepla Road, Rajpura Industrial Area, Rajpura Warehousing Zone NH 44, Mohali Phase 8, Zirakpur, Patiala Road
- Key developers: Indoswift Warehousing, SP Warehousing, AV Logistics, IndoSpace, ESR
Jaipur : The city’s economy is driven by industrial sectors such as textiles, electronics, etc., along with tourism. The capital city of Rajasthan and its surroundings are dotted with small-scale industry clusters such as blue pottery, hand block printing, handloom, and marble. The Rajasthan State Industrial Development and Investment Corporation has been undertaking several projects to promote Jaipur and its surroundings as a cost-effective investment destination.
- I&L space absorption during Jan-Sep’23 stood high (> 400 ksf.), supply (> 800 ksf.), stock – high (> 6 msf.)
- Key micro-markets of Jaipur are Sikar Road, V.K.I.A. and Ajmer Road. Sikar Road is an emerging micro-market with premium Grade A developments. It is well-connected to the Jaipur city and is in proximity to the Vishwakarma Industrial Area (V.K.I.A.), one of the oldest unorganised warehousing hubs in the city. V.K.I.A. micro-market is dominated by small-sized (25,000 – 40,000 sq. ft.) old warehousing facilities, primarily used as distribution centres for speedy deliveries. Ajmer Road micro-market, well-connected to the city and its periphery, has a pipeline of key upcoming infrastructure projects to further ease congestion and improve the turnaround time for transportation.
- Key industrial occupiers include JCB India, Perto India, Indo Autotech, ReNew Power, Normet
- Key warehousing occupiers in the market includes Tata Trent, Nestle, LG, Mondelez, Ecom Express
- Prominent I&L spaces includes:
- Key manufacturing SEZs : Mahindra World City
- Key I&L clusters: New Ring Road, DME road
- Key developers: Super Space, Mahima Group, Ashwani Gupta, Ritesh Memodia, Govind Laskari
Lucknow : The city is an emerging hub for business and industrial development and is well known for its tourism, small-scale textile embroidery, and industries such as pharmaceuticals, automotive and aeronautics.
- I&L space absorption during Jan-Sep’23 stood high (> 400 ksf.), supply (> 800 ksf.), stock – high (> 6 msf.)
- Key micro-markets of Lucknow are located at Sitapur, Nadar Ganj, Bijnor Road, Mohanlal Ganj, Mohan, Kanpur Road. Sitapur micro-market is predominantly characterized by aging warehousing facilities and high land rates. Nadar Ganj micro-market is dominated by unorganised warehousing facilities including small-sized warehouses in the range of 25,000- 40,000 sq. ft, primarily utilised as distribution centres for speedy deliveries. Bijnor Road houses small warehousing facilities and is well-connected to the city centre and peripheral areas. Mohanlal Ganj and Mohan are emerging logistics micro-markets with presence of Grade B and Grade A developments respectively.
- Key industrial occupiers include Hindustan Unilever, Hindustan Aeronautics Ltd., Tata Motors, Eveready Industries, Tata Steel
- Key warehousing occupiers in the market includes Amazon, Flipkart, Croma, Whirlpool, Nestle
- Prominent I&L spaces includes:
- Key manufacturing SEZs: HCL SEZ
- Key I&L clusters: Kisan Path Ring Road
- Key developers: Welspun Group, Rastogi Compound, Vinyak Logistics Park, BG Link Infrastructure
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE: CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2022 revenue). The company has approximately 115,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services.
CBRE was the first International Property Consultancy to set up an office in India in 1994. Since then, the operations have grown to include more than 11,000 professionals across 15 offices with a presence in over 80 cities in India. As a leading international property consultancy, CBRE provides clients with a wide range of real estate solutions, including Strategic Consulting, Valuations/Appraisals, Capital Markets, Agency Services, and Project Management. The guiding principle at CBRE is to provide strategic solutions that make real estate holdings more productive and economically efficient for its clients across all service lines. Please visit our website at https://www.cbre.co.in/
