With a young and growing population, a thriving economy, and a strategic geographic location, India has the potential to become a major hub for warehousing and logistics in the region. In this context, it is important to explore the key drivers, challenges, and opportunities of this dynamic sector in order to understand its potential and contribute to its sustainable growth. The fact that several reputed city-based developers have entered the fray for development of warehousing projects in the city bodes well for the growth of the sector.
India’s warehousing and logistics sector has experienced rapid growth in recent years, fuelled by the expansion of e-commerce, robust infrastructure, implementation of GST and the rise of organised retail. The digital transformation of the sector has been another crucial policy intervention. Initiatives such as Digital India, BharatNet, and National Logistics Portal would help promote digitalization in the industry.
“The recently introduced National Logistics Policy aims to cut India’s cost of logistics operations from 13-14% of gross domestic product to single digit by 2030 and elevate the country into the top 25 nations in terms of ranking in World Bank’s Logistics Performance Index. This is expected to provide an impetus to the commercial real estate market of the country, including warehouses and industrial parks,” the report states.
NCR accounted for the highest volume of leased deals in warehousing and logistics space during 2022, with Mumbai and Pune following closely. On the occupier front for 2022, 3PL players accounted for the majority share of 45% in the total absorption with the manufacturing segment accounting for 15.5%. Such absorption has been possible due to the government policy towards enabling India to achieve global competitiveness.
The report also indicates that with increasing maturity, the tenants have begun to raise their demands resulting in enhanced offerings and consequently higher rentals with a further expected increase in the forthcoming period. In 2022, the weighted average rentals were noted to be at around at INR 22/sqft per month.
Shrinivas Rao, CEO, Vestian, said, “India’s warehousing and logistics sector has not only shown remarkable resilience in the face of challenging economic headwinds but 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 future, driven by 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, “Vestian’s partnership with FICCI in preparing this report on the warehousing and logistics sector in India is a testament to the industry’s collaborative approach towards growth and development. The 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 has created a significant demand for warehousing space. The industry has responded well to this demand, and we are confident it will continue evolving and innovating to meet the market’s changing needs.”
Information and analysis on the warehousing investments from 2019 to 2022 shows that the majority share of the investment, almost 52% was distributed across multiple cities in the country, depicting investors’ decision to diversify their portfolio instead of focusing on one region alone.
The warehousing industry in India is expected to witness significant growth and transformation in the coming years. Despite rapid growth over the last 4-5 years, the Indian warehousing market remains much smaller in terms of per capita space compared to its developed global counterparts such as the US, UK, and the neighbouring China, hence portending vast prospects to grow in the forthcoming period. Key trends that are likely to shape the future of warehousing in India are technology-led innovation, foraying into Tier II cities, In-city warehousing, Multi-level Warehousing, and ESG. The sector is expected to continue playing a crucial role in supporting India's economic growth and development in the foreseeable future.
