India’s warehousing and logistics sector has undergone extraordinary growth in recent years, according to a joint report by Vestian, an occupier-focused workplace solutions firm and the Federation of Indian Chambers of Commerce and Industry (FICCI), titled “Warehousing & Logistics Sector in India: A Brief Analysis.” The report also evaluates the market trends and key policies defining the industry and the developments that are anticipated in the forthcoming period.
As per the report, some significant factors driving this growth include the rapid expansion of e-commerce, the rise of organised retail and the concerted effort towards the manufacturing sector. The report mentioned that 2022 saw a continued yet relatively slow growth in the warehousing and logistics sector primarily due to the potential impact of the global recession and the lower velocity of e-commerce demand as the pandemic situation improved. The sector observed a total absorption of 31.2 million sq ft recorded across the seven key cities – Mumbai, NCR, Bengaluru, Chennai, Hyderabad, Pune and Kolkata. The overall absorption growth almost matched the pre-pandemic absorption in 2019, thus signifying the sector’s fast-paced recovery despite a slowing economic environment.
According to the report, NCR accounted for the highest volume of leased deals in warehousing and logistics space in 2022, with Mumbai and Pune following closely. On the occupier front in 2022, 3PL players accounted for a major share of 45% in the total absorption in, with the manufacturing segment accounting for 15.5% of the total absorption. It was possible due to the government policy towards enabling India to achieve global competitiveness.
The report indicated that with increasing maturity, the tenants have begun to raise their demands, leading to improved offerings and higher rentals, with a further expected increase in the forthcoming period. In 2022, the weighted average monthly rentals were noted to be at around at Rs 22 per sq ft.
Information and analysis on the warehousing investments during 2019 to 2022 indicates that the majority share of the investment; around 52%, was distributed across multiple cities, depicting investors’ decision to diversify their portfolio instead of focusing on one region alone. It also showed the investors’ growing confidence in the Tier II cities of the country, as per the report.
Shrinivas Rao, CEO of Vestian, said, “India’s warehousing and logistics sector has not only shown remarkable resilience in the face of challenging economic headwinds but in fact the consistent growth in the sector’s absorption of warehousing space and the increasing institutional investment in this asset class in the past few years indicates the strong confidence of stakeholders and investors in the industry’s long-term growth prospects. The sector will continue its upward trajectory in the forthcoming period, driven by the e-commerce boom, shift of unorganized to organized retail and strong policy making by the government across sectors, notably the manufacturing sector. Furthermore, the warehousing and logistics sector has garnered a total institutional investment of USD 5.4 billion in the past four years (2019-2022), of which a significant 35% share was attributed to 2022 alone. The share of warehousing investment in 2021 and 2022 accounted for the second-highest share of institutional investment in real estate, surpassing other asset classes such as residential and retail.”
Raj Menda, joint chairman FICCI Real Estate Committee and corporate chairman RMZ Corp said, “This report provides valuable insights into the industry’s key trends and policies and will be instrumental in guiding future investment decisions. The government’s focus on the manufacturing sector and the rise of e-commerce and organized retail have created a significant demand for warehousing space.”