Tier-II cities witness 5 million sq ft surge in industrial & logistics sector leasing: CBRE

I&L thriving in tier-II: India's industrial and logistics (I&L) sector leasing across eight tier-II cities reached approximately 5 million square feet during January to September 2023. Tier-II cities are emerging as the next growth frontier, according to a recent report by CBRE.

Chandigarh, Jaipur, and Lucknow have emerged as the dominant players in this sector, recording activity in both leasing and supply addition. These cities collectively accounted for a substantial portion of the total I&L stock, surpassing 6 million sq ft as of September 2023.

E-commerce driving change

Anshuman Magazine, Chair & CEO, CBRE, highlighted the strategic shift underway, driven by improved connectivity, infrastructure development, and the flourishing e-commerce landscape. He pointed out that the country's strong consumption narrative, particularly in non-metro cities, coupled with same-day delivery expectations, has spurred the demand for warehousing facilities in these emerging markets.

Ram Chandnani, MD, Advisory & Transactions Services, CBRE India, highlighted the intensified interest from developers in tier-II cities, citing investments in modern warehouses equipped with advanced technology. He highlighted the rise of last-mile facilities such as micro-fulfillment centres and dark stores, aimed at facilitating rapid deliveries in these regions.

PLI sparks growth

The report also underscores the role of government initiatives, including the Production-Linked Incentive (PLI) scheme, in catalysing I&L investments across both tier-I and tier-II cities. Developers are increasingly focusing on strategic locations near new infrastructure projects, aiming to capitalise on the burgeoning demand for quality warehousing space.

Industry focus in cities

Among the top tier-II markets, Chandigarh, known as the 'City Beautiful', boasts a robust industrial area, encompassing diverse sectors such as manufacturing, electronics, and pharmaceuticals. Jaipur, the capital city of Rajasthan, stands out for its textile and tourism industries, supported by ongoing infrastructure projects. Lucknow, an emerging business hub, showcases a growing presence in sectors like pharmaceuticals, automotive, and aeronautics.

Key micro-markets within these cities, such as Rajpura and Zirakpur in Chandigarh, Sikar Road in Jaipur, and Sitapur in Lucknow, have witnessed significant leasing activity, attracting prominent industrial and warehousing occupiers like Hindustan Unilever, Amazon, and Tata Motors.

According to experts, with a conducive business environment, strategic investments, and government support, these cities are poised to drive sustained growth and innovation in the I&L sector for the foreseeable future.