Upcoming Infrastructure to Boost Industrial & Logistics Sector in NCR

NCR: Gateway to North India

The National Capital Region (NCR) that encompasses Delhi along with its satellite cities - Gurgaon, Noida, Greater Noida, Ghaziabad, and Faridabad - is one of India’s largest urban conglomeration. From an industrial and logistics perspective, NCR is not only the gateway to North India but also one of the fastest-growing and most important nodes of the country due to a large consumer and manufacturing base. 

The industrial growth of the region is also strongly attributed to proximity and connectivity to multiple state borders like Punjab, Uttar Pradesh, Haryana, and Rajasthan. With 10 national and multiple state highways passing through the NCR, the region boasts of 5,285 kms of well-connected strong road transportation network. The 135 kms Kundli Manesar Palwal (KMP) Expressway or the Western Peripheral Expressway, which was inaugurated in 2018, has drastically improved the regional connectivity and integration of NCR, thereby providing a backbone for both manufacturing and warehouse developments. 

NCR region also offers a large base of skilled labour, making it an ideal destination for the manufacturing sector. The presence of major industrial hubs and large-scale manufacturing units also drives the manufacturing-led warehousing requirements. This includes storage of both raw materials and finished products from industries such as automobiles, electronics, food processing etc. Also, NCR being a huge consumption center with a high population density is also a strong driver for consumption led warehousing requirement which includes categories like E-Com, apparels, daily needs, F&B, electronics etc.

Supply, Absorption & Demand Drivers

The NCR region has the highest operational warehousing stock in the country with 50.5 million sq. ft in 2020. The city has seen robust activity in the recent years with absorption rate peaking at 9.8 million sq. ft in 2019. 

On the supply side, around 10.0 million sq. ft of warehousing space is expected in 2021 against 5.0 million sq. ft in 2020. The vacancy level is likely to marginally increase in 2021 compared with the previous year. 

Driven by the robust growth seen in the e-commerce, 3PL and manufacturing sectors, industrial and warehousing space absorption in NCR region is expected to be at 7.5 million sq. ft in 2021 from 6.5 million sq. ft in 2020. The e-commerce and 3PL sectors together accounted for 54% of the total absorption in 2020, followed by manufacturing sector at 21% and retail sector at 14%. The overall vacancy levels decreased from 10.4% in 2019 to 6.4% in 2020 and the rental values remained stable in 2020 across the major micro-markets of the city.

Outlook

Several factors including steady manufacturing demand, availability of skilled manpower, established vendor base, proximity to Delhi International Airport and a large consumer market will continue to make NCR a preferred industrial and logistics destination. A renewed focus on infrastructure and self-reliance in manufacturing will also offer multiple opportunities across the logistics value chain.

Developers and several foreign private equity players have actively increased their presence in the region and have continuously expanded their portfolio of industrial and warehousing asset class over the last few years. While e-commerce and 3PL sectors will continue to drive warehousing demand in NCR in 2021, automobile, consumer electronics, food processing and engineering sectors will continue to drive the manufacturing requirements. 

Finally, the upcoming major rail and road infrastructure projects in the region i.e. Jewar Airport, Eastern Dedicated Freight Corridor, DMIC, New Delhi Mumbai Expressway and Haryana Rail Orbit Corridor will further act as a strong catalyst in the times to come. All these projects will further enhance connectivity to the other parts of the country thereby making NCR an attractive destination for players to invest into the region.