The warehousing volume of transactions in Chennai totaled 4.5 million square feet in FY2023, according to Knight Frank’s latest India Warehousing Market Report – 2023.
Warehouse leasing rose to a record 51.32 million square feet in eight cities last fiscal year, driven by strong demand from outside logistics and retail sectors. Warehouse demand data includes light manufacturing/assembly industrial space.
In terms of transaction volume by industry split, 3PL was the largest demand driver for warehouses. The sector accounted for 44% of inventory transactions in the region in FY2023, followed by manufacturing and FMCD at 24% and 17% respectively in FY2023 prompting them to outsource their logistics needs, which has fueled the expansion of 3PL providers.
Transaction activity in the Chennai market was stable, with the 3PL sector accounting for the largest share of user transactions. Overall transactions are down 11% year over year. But despite this year-to-date decline, they are still higher than any previous period except FY2022. Chennai is considered a desirable location for heavy industry due to its proximity to the sea.
In terms of transaction clustering, the Sriperumbudur-Oragadam area dominated with the highest share of warehouse transactions. The region accounted for 50% of the total transaction volume in the 2023 financial year. Known for its manufacturing industry, this cluster serves as the main hub for the automotive industry and its ancillary industries. NH 16/GNT Road-Periyapalayam Road accounted for 37% of all warehouse transactions in Chennai. Maraimalai Nagar accounted for 13% of all warehouse transactions in Chennai in FY23.
Demand from the 3PL and manufacturing sectors is expected to increase as the center focuses on expanding India’s manufacturing and industrial base. With its well-established automotive and industrial base, Chennai is well positioned to benefit from this macro trend. Hyundai’s recent announcement of a Rs.20,000 investment is one such prominent example of a major investment. According to a press release, warehousing demand will increase with the availability of suitable physical infrastructure and the required connection between key locations in and around the city and state.
Shishir Baijal, CMD, Knight Frank India said: “The growth is not limited to the eight largest markets, but has also spread to secondary markets, supported by improved infrastructure such as highway networks, rail systems and air transport.” In fact, there is a noticeable shift of the user groups within the storage market.”