Chennai and Kolkata Record the Highest Increase in Warehousing and Manufacturing Construction Costs Since H1 2020

2024-12-07 02:14:29

India's Warehousing and Manufacturing Construction Costs See Significant Increase, Led by Chennai and Kolkata

India's logistics and warehousing sector is undergoing a major transformation, driven by the nation’s rise as a global manufacturing hub, according to Sumit Rakshit, Managing Director of Project Management Services at Savills India.

Chennai and Kolkata Lead in Cost Increases

Recent data from Savills India reveals that since the first half (H1) of 2020, Kolkata and Chennai have recorded the steepest rises in construction costs for manufacturing and warehousing facilities, respectively.

• General Manufacturing Costs: Kolkata saw the highest increase at 6.7%, with costs climbing from ₹3,060 per square foot (psf) in H1 2020 to ₹3,265 psf in H1 2024. Chennai followed closely with a 6.5% rise, from ₹3,010 psf to ₹3,210 psf during the same period.
• Grade-A Warehousing Costs: Chennai topped the list with a 6.7% rise, increasing from ₹1,940 psf in H1 2020 to ₹2,070 psf in H1 2024. Kolkata reported a 6.5% increase, reaching ₹2,075 psf from ₹1,980 psf.

Other cities also experienced notable cost increases:

• In Bengaluru and Hyderabad, Grade-A Warehousing costs rose by 6% to ₹2,035 psf in H1 2024.
• For general manufacturing, Delhi-NCR and Bengaluru reported costs of ₹3,230 psf and ₹3,175 psf, respectively, in H1 2024.

Factors Behind Rising Costs

Experts attribute these increases to surging prices of crude oil, steel, aluminum, cement, labor, equipment rentals, and plumbing fixtures.

Sector Transformation and Future Outlook

India's rapid urbanization, robust infrastructure development, and economic growth are propelling demand in the industrial and logistics sectors. According to Rakshit, this demand is set to grow as India strengthens its position as a manufacturing hotspot.

"Manufacturing and warehousing facilities will see increasing demand in the coming years. Construction costs for these projects are expected to rise marginally over the next three to four years, influenced by material prices, labor costs, and interest rates," Rakshit said.

Despite rising costs, India remains cost-competitive compared to developed nations like the USA, UK, France, and Germany, thanks to its affordable labor and lower material expenses.

Supply and Sustainability

The report projects annual supply in the sector to exceed 60 million square feet in the next three to four years. Srinivas N., MD of Industrial and Logistics at Savills India, highlighted that growth in industries such as FMCG, electronics, and electric vehicles is driving demand. Additionally, the shift toward meeting ESG (Environmental, Social, and Governance) standards is spurring interest in sustainable and energy-efficient construction.

"The focus on green building practices in the industrial and warehousing sectors is expected to rise as occupiers prioritize sustainability," Srinivas noted.

This trend signals a dynamic phase for India’s industrial and logistics sector, with growth opportunities aligning with global standards and sustainability goals.