Investment Trends in Warehousing & Logistics

The past few years have seen fluctuating investment patterns in the warehousing and logistics sector. Despite a dip in 2023, investments rebounded strongly in 2024. The year saw the second-highest investment influx in the last six years, demonstrating growing investor confidence in the sector.

Year-wise Investment Trends

Record Absorption in 2024

The demand for warehousing space reached an all-time high in 2024, with a record absorption of 44.9 million sq. ft. This marked a 19% increase over the previous year. Notably, the second half of 2024 alone accounted for 28.3 million sq. ft. of absorption, a 70% jump compared to the first half—the highest ever recorded in a single year.

Yearly Absorption Trend

Sector-wise Absorption Trends

The absorption of warehousing space varied across different sectors, with 3PL companies leading the demand, though their share saw a decline compared to the previous year. Meanwhile, the engineering and manufacturing sector saw a significant uptick in absorption, driven by government incentives such as the Production Linked Incentive (PLI) scheme and the Make in India campaign.

Sector-wise Absorption in 2024 vs. 2023

City-wise Analysis

Warehousing absorption across major cities showed significant variations, with some cities witnessing a surge while others experienced a decline. Mumbai emerged as the leader in absorption, while NCR recorded the sharpest decline.

Highlights of City-wise Absorption:

• Mumbai reported the highest absorption at 18.6 million sq. ft. in 2024, growing by 82% compared to 2023. This surge is attributed to improved connectivity via the Navi Mumbai airport and the rise of quick commerce in major tier-1 cities.
• Pune recorded the highest growth rate in absorption among the top seven cities, increasing by 85% to 13 million sq. ft. However, rental rates declined by 3% to INR 22.9/sq ft/month.
• Chennai, Hyderabad, and Kolkata together accounted for 15% of the total absorption in 2024, down from 22% in 2023.
• NCR saw the most significant decline in absorption, dropping by 55% from the previous year. The region’s share in pan-India absorption plummeted from 23% in 2023 to just 9% in 2024.

City-wise Share in Absorption

Rental Trends

• Chennai had the highest rental rates in 2024 at INR 24.2/sq ft/month, witnessing an 11% increase due to limited land availability within city peripheries.
• Mumbai emerged as the most affordable warehousing market in 2024, with an average rental of INR 18.1/sq ft/month.
• Pune saw a depreciation in rental rates by 3%, bringing the average to INR 22.9/sq ft/month.

Key Takeaways:

• Investments in the W&L sector surged by 203% year-on-year, underscoring strong investor confidence.
• Warehousing absorption hit a record high of 44.9 million sq. ft., with Mumbai leading at 18.6 million sq. ft.
• The 3PL sector remained dominant but showed signs of fragmentation, while engineering and manufacturing saw increasing demand.
• Mumbai and Pune were the biggest gainers in terms of absorption, while NCR saw a sharp decline.
• Rental trends varied significantly, with Chennai experiencing the highest appreciation, while Mumbai remained the most affordable market.

Looking ahead, India’s position as a key logistics hub is expected to strengthen further. Positive investor sentiment, government policies, and infrastructure advancements will continue to shape the sector. However, challenges such as limited skilled workforce availability, regulatory hurdles, and land acquisition costs may need to be addressed to sustain this growth trajectory.

SFI Analysis

The warehousing and logistics sector in India demonstrated resilience and growth in 2024, fueled by increasing institutional investments and rising demand. The surge in quick commerce, robust infrastructure development, and government-led initiatives contributed significantly to this momentum.

Also Read: India’s tallest warehouse

The post Robust Investments Bolster Warehousing & Logistics Sector in 2024 appeared first on Square Feat India.

Flex Spaces Surge in India

In India, flex spaces have become a significant component of the commercial real estate market. Since 2019, the stock of flex spaces has doubled, surpassing 50 million square feet (msf) by the second quarter of 2024. The share of flex spaces in occupiers’ portfolios has grown from 5-8% in 2019 to approximately 10-15% in 2024. This surge is driven by the increasing demand for adaptable work environments that cater to dynamic business needs.

“India is a leading player in the APAC flex market, with a penetration rate of 7% compared to 3-4% in other regional markets. The robust growth is evidenced by significant expansions from leading flex operators across major cities. In the first half of 2024 alone, there was 4.4 million square feet of flex leasing. We expect demand to potentially surpass the 2023 high of 8.7 million square feet by year-end,” said Arpit Mehrotra, Managing Director of Office Services at Colliers India.

Key Trends Shaping Corporate Real Estate

Colliers’ report identifies five crucial trends transforming corporate real estate strategies:

1. Enhanced Enterprise Resilience: Companies are focusing on flexibility within their real estate portfolios to withstand market fluctuations and adapt to changing needs. Globally, 80% of CRE leaders plan to reduce or maintain their office space by 2026, highlighting a shift towards more flexible and optimized real estate assets.
2. Workplace Transformation for Talent Management: The rise of hybrid working models is driving changes in workforce management. 59% of CRE leaders globally are expected to use labor market analytics more proactively, underscoring the importance of data-driven decision-making.
3. Artificial Intelligence and Data Integration: AI and data analytics are revolutionizing real estate strategies, enhancing efficiency, and optimizing resource allocation. 31% of CRE leaders see AI as a key area for organizational transformation in the next five years.
4. Diversification in CRE Partnerships: There is a growing trend towards adopting multiple CRE partner models to improve service delivery and operational flexibility. 98% of CRE leaders plan to either maintain or increase their outsourcing strategies in the coming years.
5. Sustainability-Focused Real Estate Upgrades: With increasing regulatory pressures and environmental concerns, there is a strong push towards upgrading legacy real estate assets. 57% of CRE leaders are prioritizing sustainability practices in their real estate decisions.

India’s Green Certification Growth

India has seen a significant rise in green-certified office space. As of Q2 2024, approximately 490 million square feet of India’s Grade A office stock is green-certified, marking a 68% increase since 2019. This growth reflects the heightened demand for sustainable workspaces. Vimal Nadar, Senior Director and Head of Research at Colliers India, noted, “High-performing green assets have gained considerable importance among stakeholders. Sustainable practices, including green building certifications and environmental assessments, will remain critical for developers and investors.”

The report indicates that as the market continues to evolve, innovation, flexibility, and sustainability will be key drivers in shaping the future of commercial real estate in Asia Pacific and India.

Also Read: 58% of companies to expand flexible office space portfolio by 2026

The post Flex Spaces and Sustainability Drive Commercial Property Trends in APAC and India, Colliers Reports appeared first on Square Feat India.

Regional Insights

Mumbai and Pune dominated the warehousing and logistics sector in H1 2024, collectively accounting for 63% of the total absorption. Mumbai’s share surged from 25% in H1 2023 to 41% in H1 2024, driven by heightened demand for grade-A warehouses in areas such as Bhiwandi, Panvel, Uran, Taloja, and Ambernath. In contrast, NCR’s share plummeted from 31% to just 6%, reflecting a significant drop in activity. Chennai, however, experienced a remarkable 191% increase in absorption, reaching 1.5 million square feet due to the low base effect from the previous year.

City-Wise Absorption Data

Sector-wise Absorption Trends

Third-party logistics (3PL) companies led the absorption with a 39% share in H1 2024, up from 26% in the previous year. The engineering & manufacturing sector also saw its share increase to 22% from 16%, while the automobile and auto components sector grew to 9% from 4%.

Investment Highlights

The warehousing and logistics sector attracted USD 1.6 billion in investments during H1 2024, representing 42% of the total institutional investments in real estate. This investment amount equals one-third of the total institutional investment received over the past four years and marks a 4.5-fold increase compared to H1 2023.

Key deals included:

• USD 1.5 billion investment by KKR and Abu Dhabi Investment Authority (ADIA) in Reliance Retail Ventures’ warehousing assets, accounting for 96% of the sector’s total investment.
• CapitaLand India Trust (CLINT) signed a forward purchase agreement with Casa Grande Group for three industrial facilities at OneHub Chennai, valued at approximately USD 32.3 million.
• Goa Investment Promotion and Facilitation Board (Goa-IPB) signed a MoU with TVS Industrial and Logistical Parks (TVS ILP) for developing a grade-A warehousing and logistics park in Verna Industrial Estate with an investment of USD 15.6 million.

Rental Trends

Weighted average rentals slightly declined by 3% to INR 21.6 per square foot per month in H1 2024. Bengaluru saw the highest rental decline of 8%, while Hyderabad experienced a 7% decrease. Conversely, Pune’s rentals surged by 30% to INR 27.1 per square foot per month, and Chennai saw a 22% increase.

Conclusion

The warehousing and logistics sector continues to show strong growth, with significant investments and notable shifts in regional and sectoral absorptions. Despite a decrease in overall absorption compared to the previous half-year, the sector remains dynamic with increased investment and evolving rental trends.

Also Read: Industrial & warehousing demand remains healthy with about 13 mn sq ft of leasing in H1 2024

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