The warehousing market is expected to record the highest ever net absorption at 42.5 million sq ft. by 2022-end: JLL
By Varun Singh
Demand for warehouses has seen a healthy incline in India. Projections till December 2022 indicate a record net absorption of 42.5 million sq ft in 2022 as against 39 million sq ft. in 2021.
3PL/ logistics has remained the largest sector in terms of warehousing demand over the years. Due to a behavioral change from making offline purchases to online, demand for e-Commerce has gained significant traction over the last few years. However, the demand from e-Commerce players has cooled down in H1 2022, given that e-Commerce players have added adequate capacity in 2021.
According to the JLL report ‘India Warehousing Market: Present and Future,’ Grade A stock in India for the year 2021 was at 134 million sq ft. translating to a 3-year CAGR of 27%.
With rising disposable incomes and consumption-led demand, retail demand expanded strongly in H1 2022. Engineering and auto and ancillaries are the other main drivers of demand in H1 2022, since manufacturing companies have been incentivized with favourable government policies to attract MNCs as well as domestic investments.
“There are three main drivers in the logistics and industrial sector: the growth witnessed in manufacturing, and warehousing sectors, and the keen interest shown by investors as they continue to remain bullish. Within the manufacturing sector, the Government of India continues to incentivize growth via attractive policies, wherein we have seen significant investments from MNCs as well as domestic companies who have ambitious plans to ramp up. In terms of the warehousing sector, we have witnessed unprecedented growth driven by 3PL/ logistics players, retail, and e-commerce in Tier I as well as Tier II cities. The average sizes of Grade A warehouses have increased by 2x from 80,000 sq. ft. in 2016 to 160,000 sq. ft. in H1 2022,” said Sanjay Bajaj, Managing Director (Logistics and Industrial) India, JLL.
We have seen a large amount of private equity/ Indian Corporate developers focusing on this sector who wish to build compliant, sustainable, and technologically advanced industrial parks for occupants,” he added.
Rentals Go up
After the slow growth in the warehousing rental values over the past 5 years, H1 2022 witnessed upward corrections in the rental values due to increasing land prices and construction costs. The rent index in H1 2022 observed a significant jump reaching 129
With the increasing demand in the market, there is a significant dip in overall vacancy to reach 11.4% in H1 2022. The Grade A vacancy has also reached 7.7% in H1 2022 and is projected to reduce further in 2025 on the back of strong demand for quality and compliant spaces.
There has been an evolution of the warehousing space in India. There is a shift from mere storage spaces to highly sophisticated warehousing management systems. This shift towards sophisticated, cutting-edge storage has resulted in a two-fold increase in the average size of Grade A warehouses in India. The warehouse size has expanded not only in terms of area but also in terms of average height, which has increased from 9 m in 2016 to 12 m in 2021. The average volume of Grade A warehouses has grown by 3x over the past 5 years.
The industrial and warehousing sector has recovered very sharply since COVID-19 – the reasons for the sharp recovery being – India is in a more favorable position given the changing global supply chain dynamics, strong government policies, and strong domestic demand.
Also Read: Industrial and warehouse logistics park supply estimated at 330 mn sq ft by 2023
