- In 2023, for the very first time, Grade A warehousing stocks overtook Grade B at 188 million sq. ft
- The sector is expected to grow to 595 million sq. ft by 2027
- Total Grade A stock stood at 188 million sq. ft translating to a 5-year CAGR of 23%.
Total warehousing stock, including Grade A and B, across *eight cities stood at 371 million sq. ft by the end of 2023, up from 329 million sq. ft a year ago, according to JLL’s latest report titled ‘Exploring India’s Thriving Logistics and Warehousing Landscape’ released today at LogiMAT India 2024 at Delhi NCR. In 2023, India witnessed a 15% Year-on-Year (Y-o-Y) growth in total stock in Grade A & B warehousing space in the top eight cities. The overall warehousing space stands at 371 million sq. ft at the end of 2023. Among the eight major cities, more than half of the warehousing stock is contributed by the country’s three largest cities, including Delhi NCR, Mumbai, and Bengaluru.
Warehouse Net Absorption**
Yogesh Shevade, Head of Logistics & Industrial, India, JLL said, “The Indian warehousing sector is on an exceptional growth trajectory since 2017, with a 15% year-on-year increase in total warehousing stock, reaching 371 million sq. ft. The sector experienced a net demand of ~40 million sq. ft. in this year, with a remarkable 70% of this demand accounted by Grade A spaces. This growth has been driven by the rising demand for efficient logistics and supply chain solutions, prompting a shift towards quality facilities that align with evolving demand.”
The warehousing sector has shown robust recovery in 2021 and significant growth in the subsequent years. The year 2023 witnessed a net demand of 40 million sq. ft with ~70% of the demand observed in Grade A space. This shows a shift in occupiers’ preference towards quality spaces due to adherence to additional hygiene and safety norms during COVID-19. Pune witnessed highest absorption with 8 million sq. ft. of net absorption driven by the growing manufacturing demand in the country, propelled by government initiatives such as Make in India and Production Linked Incentives Schemes. Mumbai and Delhi NCR, known as the largest warehousing markets, closely followed Pune with net absorption of ~7 million sq. ft. each.
Warehouse net absorption in top 8 cities of India (mn sq ft)
Source: JLL Logistics & Industrial
Demand rise, vacancy dips
With the increasing demand in the market, there is a marginal dip in overall vacancy rate, reaching 15% in 2023, and is expected to further decrease to 8% in 2027. The Grade A vacancy has witnessed a significant decrease from 7% in 2022 to 5% in 2023, and it is projected to remain below 5% in 2027 due to strong demand for quality and compliant spaces.
Rents correct in 2023
After a period of slow growth in rent over the past five years, rents have witnessed an upward correction in 2022 and 2023 due to increasing land prices and construction costs. The overall rent has increased with a 6% year-on-year growth rate from 2021 to 2023.
3PL continues to lead, but manufacturing is not far behind
While, 3PL/Logistics has remained the largest segment based on warehousing space demand over the years, the other significant contributors to the demand in 2023 are manufacturing sectors, including Engineering and Auto and Ancillaries as manufacturing demand revived post-COVID lockdown. Demand from Retail and FMCG sectors has remained consistent in 2023 with the increasing disposable incomes and consumption-led demand. Space demand due to E-Commerce has gained traction in the last few years due to a behavioural shift from making offline purchases to online.
Looking ahead
As the Indian economy rebounds strongly from the impact of the pandemic, the logistics and warehousing industry is poised for robust growth driven by evolving consumer demand, the expanding presence of 3PL companies, and increased traction in manufacturing sectors.
Over the next three years, the warehouse stock in India is projected to experience a CAGR of 12%, reaching 595 mn sq ft by 2027. The Grade A stock is anticipated to witness a CAGR of 16%, reaching 345 mn sq ft by 2027. The growing preference among occupiers for superior-quality spaces contributes to a consistent reduction in Grade A vacancy rates and an upward trajectory in rental prices. Grade A vacancy rates are predicted to steadily decline to less than 5% in the next three years.
3PL/Logistics has remained the largest segment based on warehousing space demand over the years. The other significant contributors to the demand in 2023 are manufacturing sectors, including Engineering and Auto and ancillaries as manufacturing demand revived post-COVID lockdown, as well as increasing the Government’s focus on this sector through policies such as Make in India. Demand from Retail and FMCG sectors has remained consistent in 2023 with the increasing disposable incomes and consumption-led demand. Space demand due to E-Commerce has gained traction in the last few years due to a behavioral shift from making offline purchases to online. COVID-19 accelerated e-Commerce adoption in 2020-2021, leading to an increase in demand for online delivery of essential and non-essential items. as e-commerce penetration has increased over the years. However, the demand from e-commerce has cooled since 2022, having met with a surge in demand during COVID lockdown.
