According to a report by Savills India, A-warehousing construction costs have increased by an average of 9.26% to 10.44%, with Mumbai and Kolkata seeing the highest construction costs for industrial and warehouse spaces.

Savills India conducted research to evaluate the construction costs of industrial and storage projects in India's top eight cities.

The costs of the most commonly used materials in construction were evaluated across the cities to arrive at the total price. These materials include crude oil, steel, copper, cement, glass, wood, and other necessary materials, along with wages.

Industry and warehousing is one of the most resilient segments in India. Demand for industrial and warehouse units is likely to remain unscathed in the long run. We expect construction costs for industrial and storage projects to rise in 2022. However, the growth is dependent on material costs, labor, equipment rental costs, interest rates and other related costs, said Srinivas N, Managing Director, Industrial and Logistics, Savills India.

As of the first quarter of 2022, Mumbai and Kolkata saw the highest construction prices at Rs 2,115 per square foot for prime warehouse space and Rs 3,295 per square foot for a general manufacturing unit. This was followed by Pune, which saw prices at Rs 2,100 and Rs 3,265 per square foot respectively, according to Savills India.

Construction costs have risen due to rising material costs such as crude oil, cement, steel, aluminum, labor, equipment rental costs, and plumbing and fixture prices. Also, Covid-19 has caused a major shift in construction costs, leading to slightly higher material prices and supply chain disruptions.

However, compared to its international counterparts, overall production in Indian cities ranges from $453 - $465 per square meter, while for Grade-A warehousing it ranges from $291 - $299 per square meter as of Q1 2022.

The Covid-19 crisis had a minimal effect on the construction activities of industrial and warehouse projects. In terms of general manufacturing construction price growth, it ranges between 7.72% and 8.68%, while prime urban warehouse construction costs increased between 9.26% and 10.44% between Q1-2020 and Q1-2022. This increase can be attributed to the rise in steel costs with other construction materials and raw materials, including labor and additional provisions for Covid-relevant health and safety guidelines, said Sumit Rakshit, Managing Director, Project Management Services, Savills India.

The construction sector contributed 7.6% to gross domestic product (GDP) in 2020-21. The projected growth in construction activity will make a huge contribution to GDP in 2022-23.