In Bangalore, the cap rates for the logistics & warehousing assets continue to remain flat Q-o-Q with significant volume registered in lease transactions. Similarly, rental rates and capital values for Grade A commercial office segment have been flat with no significant change. Though interest rate regime is stable, the impact on the cap rate movement is limited due to transaction volumes and perceived risk not changing much.
While 3PL players continued to dominate the demand with about 36% share, space uptake by players from engineering, FMCG and electronics segments was significant with 12-16% share each. Interestingly, both engineering and electronics segments witnessed over 1.7X times leasing activity in H1 2024, compared to the corresponding six-month period of 2023. Going ahead, driven by conducive industry-specific policies and an enabling regulatory framework, diverse segments are likely to propel the industrial and warehousing space demand in India.
Grade A office buildings with a built-up area of less than 5 lakh sq ft account for 47% of the total number of green-certified buildings. On the other hand, office buildings with a built-up area of more than 10 lakh sq ft account for only 19% of the total number of green-certified buildings. Despite this, 90% of the total projects within this category still qualify as green buildings, showcasing a strong focus on sustainability. Notably, green certification is rare in office buildings with a built-up area of less than 1 lakh sq ft. This signifies lower preference for sustainability practices amongst small and medium-scale developers and occupiers.
ICRA estimates the industrial and warehouse logistics park (IWLP) supply to grow by 13-14% YoY in FY2025 in the eight primary markets to around 424 million sq. ft. Moreover, the absorption is estimated to increase to 47 million sq. ft. in FY2025 (90% of incremental supply addition) from 37 million sq. ft. in FY2024, supported by strong consumption-led demand. The vacancy in the eight primary markets stood at 10% in FY2024 and is likely to remain at a similar level in FY2025.
Development completions of about 13.2 mn. sq. ft. was witnessed in Apr-June ‘24, up by 49% Q-o-Q, and 11% Y-o-Y. Bengaluru, Mumbai and Hyderabad drove supply addition during the quarter with a cumulative share of about 69%. The non-SEZ segment dominated development completions with a share of 90% in Q2 2024. Developers continued to exhibit their efforts towards sustainability, with over three-fourths of the newly completed space during Q2 2024 being green-certified (LEED or IGBC-rated).
Office market well placed to cross 50 million square feet of absorption in 2024, third year in a row. Q2 2024 saw 15.8 million square feet of leasing across the top 6 cities. Developer confidence remains strong with 13.2 million square feet of completions in Q2 2024. With 52% cumulative share in Q2 2024, Bengaluru and Mumbai drive India office demand. Technology and Engineering & manufacturing sectors account 45% of quarterly demand, highest flex space activity in any quarter.
Nationwide, market rentals across Grade A spaces continued to increase, nearing the INR 100 per square feet milestone, with an 8.7% QoQ increase in Q1 CY 2024. The disparity between market and existing rental rates expanded to approximately 14%, signalling a robust landlord-centric market environment. Specifically, Bengaluru, Pune, and Hyderabad experienced an uptick in rental rates during Q1 CY’24 compared to the preceding quarter.
Absorption of office spaces increased to 13.40 Mn sq ft in Q1 2024 from 11.85 Mn sq ft in Q1 2023, showcasing a 13% increase Y-O-Y, says a Vestian report. However, the absorption declined by 31% this quarter after peaking in Q4 2023. Southern cities (Bengaluru, Chennai, and Hyderabad) accounted for 61% of the Pan-India absorption in Q1 2024 its share increased from 54% a year earlier.
The project Zeassetz’s Isle of Life consists of 484 studio apartments, with residents able to choose between two sizes: a 272 sq ft apartment or a slightly larger 292 sq ft apartment. This project expands Zeassetz’s buy-to-rent portfolio and provides customers with fully furnished apartments and comprehensive tenant management, enabling secure and straightforward rental income. Each unit is MahaRERA-approved and fully furnished interiors and managed properties. This project emphasises affordability, convenience, and easy rentals making it a suitable option for modern investors seeking convenience and high returns.
Third-party logistics players (3PL) continued to be the top occupiers of industrial and warehousing space, contributing to over 40% in the total warehousing demand. 3PL space uptake was driven by healthy activity in Chennai particularly. The city accounted for about 43% of the overall 3PL activity in the top five cities. Interestingly, at the Pan-India level, retail players accounted for 16% of the demand during the quarter, followed by engineering and automobile players with 12% share each.