In the first half of 2023 (H1 2023), the warehousing and logistics sector recorded 49% of total absorption registered over the entire previous year, according to a report by Vestian. This marks growth of 17% YoY, reaching an estimated 15.4 million square foot (msf).
Shrinivas Rao, FRICS, CEO, Vestian, “The Indian warehousing and logistics sector is sailing through global headwinds on the back of strong and sustainable fundamentals. Several mega infrastructure projects are planned across the country to improve connectivity and reduce transit time.”
The National Capital Region (NCR) accounted for the highest share of the total absorption during H1 2023 at 31%, which increased from 21% in H1 2022. This indicates a robust demand for warehousing and logistics facilities in and around Delhi, Noida and Gurgaon, says the report. Western cities of India, Mumbai and Pune, accounted for 42% of the total absorption during H1 2023, increasing from 35% in H1 2022. The micro-markets of Bangalore and Hyderabad witnessed a drop in demand for warehousing facilities due to the limited supply of Grade A warehouses in the regions during H1 2023.
|
City |
Absorption |
||
|
H1 2023 |
H1 2022 |
Change |
|
|
NCR |
4.7 msf |
2.8 msf |
68% |
|
Mumbai |
3.8 msf |
2.2 msf |
75% |
|
Pune |
2.6 msf |
2.5 msf |
6% |
|
Bangalore |
1.7 msf |
1.8 msf |
-6% |
|
Hyderabad |
1.3 msf |
1.4 msf |
-7% |
|
Chennai |
0.5 msf |
1.5 msf |
-67% |
|
Kolkata |
0.8 msf |
1 msf |
-23% |
|
Total |
15.4 msf |
13.2 msf |
0.17 |
Micro-markets of NCR quoted the highest weighted average rentals of Rs 22.5 per sqft/month, complementing the region’s highest absorption amid strong demand and a competitive market. Therefore, the weighted average rentals increased by 4% within a year. Beangalore closely followed the NCR market with weighted average rentals of Rs 22 per sqft/month.
|
City |
Weighted average rentals per sqft/month |
||
|
H1 2023 |
H1 2022 |
Change |
|
|
NCR |
Rs 22.5 |
Rs 21.6 |
4% |
|
Bangalore |
Rs 22 |
Rs 22 |
0% |
|
Pune |
Rs 20.9 |
Rs 20.8 |
0% |
|
Hyderabad |
Rs 20.5 |
Rs 20.4 |
0% |
|
Chennai |
Rs 19.9 |
Rs 20 |
-1% |
|
Mumbai |
Rs 19.7 |
Rs 19.3 |
2% |
|
Kolkata |
Rs 18.2 |
Rs 18.2 |
0% |
3PL companies continued to be the major demand driver in H1 2023 with 26% of the total share. Engineering and manufacturing and FMCG companies accounted for 16% and 11% share respectively. Despite sustained leasing activities during H1 2023, institutional investments were reduced by 69% over H1 2022, as investors opted for wait-and-watch mode amid global uncertainty. However, the trend for overall institutional investments remains the same.
“Vertical stacking and in-city warehousing are gaining prominence to improve efficiency and reduce cost. There is a focus on ESG factors within the sector which again is in alignment with clients’ environmental and social objectives and goals,” Shrinivas Rao added.
The emergence of tier-2 cities as warehousing hubs and extensive use of AI and ML technologies to improve efficiency may shape the future of the warehousing and logistics sector in India. Additionally, the ‘Make in India’ campaign and ‘China plus One’ strategy coupled with upcoming mega infrastructure projects may provide impetus to the Indian manufacturing industry, leading to an increase in demand for warehouses, says the report.s
