Industrial & Logistics Constrn. to Cross 60 Mn Sq Ft Annually Amid Competitive Costs: Savills India

December 3, 2024: Savills India has released its latest findings in the Savills Construction Cost Guide: Industrial & Logistics. The report provides an in-depth analysis of construction costs for General Manufacturing and Grade-A Warehousing across India’s top eight cities. The study highlights significant cost escalations over the past four years, driven by rising prices of raw materials and labour. 

According to the report, construction costs in India have surged by 3.4% to 6.7% for General Manufacturing and 4.8% to 6.7% for Grade-A Warehousing between H1 2020 and H1 2024. Among cities, Kolkata recorded the highest escalation for General Manufacturing costs at 6.7%, followed closely by Chennai (6.5%). For Grade-A Warehousing, Chennai led the surge with a 6.7% increase, with Bengaluru and Hyderabad each witnessing a 6.0% rise. This increase can be attributed to the rise in the prices of crude oil, steel, aluminium, cement, labour, equipment rentals and costs of plumbing and fixtures. 

Construction Costs (INR per sq. ft.) city wise for General Manufacturing Grade-A Warehouse: H1 2020 vs H1 2024

Source: Savills India Cost Benchmarking Data 

Srinivas N, Managing Director, Industrial and Logistics, Savills India said “The manufacturing and warehousing sectors are experiencing substantial construction, driven by increasing market demand, supportive government policies, growth in the FMCG & FMCD, electronics, apparel, EV and associated sectors. This dynamic environment is setting the stage for robust growth as new facilities are developed to meet the evolving needs of the industry. The changing occupier preferences to meet ESG (Environmental, Social, and Governance) standards are likely to leading to increased demand for sustainable and energy-efficient buildings, driving the adoption of green construction practices in industrial and warehousing sectors.” 

Sumit Rakshit, Managing Director, Project Management Services, Savills India said “In the current economic upswing, India’s logistics and warehousing industry is on the brink of a remarkable transformation. Additionally, India is emerging as a global manufacturing hotspot. Naturally, the demand for manufacturing and warehousing facilities is expected to surge in the coming years. We expect construction costs for industrial and warehousing projects to increase marginally over the next 3-4 years. The magnitude of growth is dependent on material costs, labour, equipment rental costs, interest rates and other related costs. However, India offers very significant cost arbitrage, compared to the developed economies.”

India’s rapid urbanization, robust infrastructure development, and economic growth have collectively driven significant demand, boosting construction activity in the industrial and logistics sector. Supply is projected to surpass 60 million sq. ft. annually over the next 3-4 years. Despite rising costs, India remains cost-competitive, with construction expenses for manufacturing and warehousing substantially lower than in developed nations like the USA, UK, France, and Germany, owing to affordable labor and relatively lower material costs.