Chennai Leads Construction Cost Surge in Industrial and Warehousing Sectors: Savills India Report

Savills India’s latest Construction Cost Guide: Industrial & Logistics reveals notable cost increases in building General Manufacturing and Grade-A Warehousing facilities across India’s top eight cities from H1 2020 to H1 2024. Key drivers include escalating raw material prices, labour costs, and equipment rentals.

The report highlights a 3.4%-6.7% surge in construction costs for General Manufacturing and a 4.8%-6.7% rise for Grade-A Warehousing. Chennai emerged as a cost escalation hotspot, witnessing a 6.5% rise for General Manufacturing and leading with a 6.7% hike for Grade-A Warehousing. Factors influencing these increases include higher prices for crude oil, steel, cement, aluminium, plumbing, fixtures, and labour.

Srinivas N, MD of Industrial and Logistics, Savills India, noted that demand for new facilities is fueled by growth in FMCG, FMCD, electronics, apparel, EV sectors, and supportive government policies. He emphasized the growing importance of ESG (Environmental, Social, and Governance) standards, which are driving the adoption of sustainable and energy-efficient construction practices in the industrial and warehousing sectors.

Sumit Rakshit, MD of Project Management Services, Savills India, pointed out that India’s logistics and warehousing industry is undergoing a transformative phase. He projected moderate construction cost increases over the next 3-4 years, influenced by factors such as material prices, interest rates, and equipment rental costs. Despite this, India remains a global cost-competitive manufacturing hub due to affordable labour and lower material costs compared to developed countries like the USA, UK, France, and Germany.

India’s industrial and logistics sectors are also benefiting from rapid urbanization, robust infrastructure development, and economic expansion. Supply is expected to exceed 60 million sq. ft. annually in the next 3-4 years, addressing the growing demand for manufacturing and warehousing facilities.

While rising costs pose challenges, India’s significant cost advantage ensures sustained global competitiveness in industrial and logistics construction.