
Shrinivas Rao, CEO, Vestian
India is emerging as a key centrepiece of global trade; one of the underlying pillars driving this growth is the burgeoning warehousing industry in the country. As per the Investment Information and Credit Rating Agency of India Limited (ICRA) estimates, the warehousing sector is projected to develop at a CAGR of 10.5% through 2025 after growing at a CAGR of 7.8% over the past five years.
The pandemic not only brought the warehousing and logistics sector into the limelight, but also led to it being recognised as an ‘essential services’ sector - one of the crucial lifelines that the country was reliant on during the challenging period. Consequently, companies across sectors, such as third-party logistics, engineering and manufacturing, and the rapidly growing e-commerce sector have made significant investments in the warehousing industry.
Vestian’s warehousing report states that the seven key cities of the country saw around 7.55 million square feet of total warehousing and logistics space leased during the period Q3 2022, bringing up the January-September warehousing absorption to 20.71 million sqft. While third party logistics led the absorption with 43% share, it was followed by engineering and manufacturing and e-commerce with 24% and 16%, respectively. Given the momentum, warehousing absorption for 2022 is estimated to be pegged at around 33 million sqft.

Right time to bet on Indian warehousing
India, the seventh largest country in the world, holds a key potential to be developed as a warehousing hub, given the presence of contiguous land parcels for such developments. Over the past decade, with the emergence of e-commerce, introduction of the Goods and Services Tax, and the National Logistics Policy, along with permitting 100% Foreign Direct Investment (FDI) in the sector, warehousing today is witnessing increased traction among investors. Industry reports state that the warehousing and logistics sector requires at least $20 billion of fresh investments by 2030 to develop incremental warehousing spaces - opening up immense opportunities for investors. In 2022 alone, the sector raised investments in the range of around $1.3-$1.5 billion, indicating strong investor interest. Thus, even as the returns on investment in other sectors drop due to recessionary fears, India and the warehousing growth story are a bright spot on the horizon.
Democratisation of the industry
Unlike Western countries where a single farmer or individual owns large tracts of land, land holding in India is quite fragmented, hence, acquisition of land used to be a challenge. However, with landowners understanding the importance of the warehousing industry in creating shared value for everyone, and the emergence of aggregators in the real estate sector, the warehousing sector in the country is on its way to democratisation. This has led to the emergence of small landowners as developers and creation of new opportunities for small businesses across regions.
Narsapura in Karnataka, for instance, houses some of the biggest warehousing units for logistics and supply chain management service providers, automobile, apparel, and retail companies; and has caught the attention of warehouse developers and investors from across the country. This growth has been on the back of consolidation of land parcels, which enabled developers and investors to make big bets on the warehousing market to support the fledgling industry in the region. This has also led to unlocking of large land parcels, enabling the industry to set up large industries.

Warehousing forays into Tier II cities
The sector has expanded its wings into Tier II cities across the country. Cities like Lucknow, Raipur and Baroda are registering a huge growth in demand for new-age internet commerce-led services, driving demand for warehouses, and creating opportunities to build proper storage facilities, ease transportation and logistics costs, reduce traffic congestion, and improve infrastructure. These cities have been witnessing warehousing space absorption of 100,000 to 200,000 sqft from an earlier figure of less than 50,000 sqft. This will lead to the creation of an ecosystem of allied services, which will drive entrepreneurship, employment, and economic activity in these cities. This will also lead to a reorganisation of the warehousing market in these regions and drive the creation of quality properties and better services for occupiers.
Rise of large warehouses in India
The year 2022 witnessed the rise of large warehouses in India, measuring up to 10 lakh square feet which otherwise hovered in the range of 3-5 lakh square feet. This is a testament to the increasing trust of occupiers, developers, and investors in the growth journey of the sector. Similarly, the average size of Grade-A warehouses also saw an increase in 2022 and the industry will continue to see an upward trend.
The emergence of large warehouses will also drive automation within the facilities, thereby bringing efficiency in operations and reducing costs. From long conveyor belts to robotics, it will also lead to upskilling of the warehousing workforce, which will prepare the sector for the next phase of rapid growth.
As these trends pan out in 2023, government interventions will play a pivotal role in fast tracking this growth journey and help reduce logistics cost. According to National Logistics Policy, India's logistics cost is estimated to be around 14% of the GDP, which the government is looking to bring down to 8-9% through such interventions.
It is also important to note that there are concerted efforts from governments, both at Central and State level, which will be crucial for the growth of the sector. Thus, with proactive steps being undertaken, from single-window approval policy to incentives for setting up warehouses, to development of logistics infrastructure, the warehousing industry is poised for stellar growth.