Warehousing space leasing touches 23 msf in H1 2024: Report

July 30, 2024: Warehouse transactions across eight primary markets of India were recorded at 23 million square foot (msf) in the first half (H1) of 2024, according to Knight Frank India’s report titled ‘India Warehousing Market Report – H1 2024’. A total of 55% of these transactions have occurred in Grade A spaces during the current period of analysis. While occupier sentiments continue to be strong, traction in the warehousing market continues to consolidate in H1 2024. The 23 msf transacted in H1 2024 represents a 4% drop in transacted volume compared to that seen in H1 2023.

Transaction activities were well distributed across markets. Mumbai, the leading market, accounted for 20% of the total warehousing volume, driven primarily by the 3PL sector. NCR was the second most prolific market, representing 17% of the total warehousing area transacted during the period, with 3PL and manufacturing sectors driving volumes.

Pune was the most expensive warehousing rental market in the country (amongst the reviewed eight cities) with average rent at Rs 26/sqft/month. It was followed by Kolkata with a rental rate of Rs 23.8/sqft/month and Mumbai at Rs 23.6/sqft/month. Rent growth across markets has been relatively healthy and can be attributed to reduced supply in recent times. Pune and Chennai showcased a 4% increment in rentals followed by NCR and Kolkata at 3% YoY growth.

Shishir Baijal, chairman and managing director, Knight Frank India, said, “Demand from the manufacturing sector has compensated for the lull in E-commerce and helped broad base the market’s occupier profile. While the availability of viable land for warehousing development remains a challenge, high institutional interest in this space should enable development of high-quality supply. Despite potential impacts from the global economic and geopolitical landscape, India’s robust fiscal position and resilient economy are well-positioned to sustain and enhance the warehousing market’s stability and growth potential for the remainder of fiscal year 2024.”

The volume transacted by the manufacturing sector companies has continued to exceed that of the 3PL sector in H1 2024. This is significant considering that the 3PL sector has traditionally anchored the Indian warehousing market. Manufacturing sector companies such as those from the automotive, energy and chemicals space constituted a substantial 36% of the total transacted volume during the period. India has benefited from the sustained move towards decentralisation of manufacturing capacity with global manufacturing giants such as Apple, Samsung, Foxconn and TSMC expanding their manufacturing base in the country.

Second to the manufacturing the 3PL sector companies comprised 30% of the volume while the other sectors had single-digit shares. E-commerce sector volumes have dropped since the beginning of 2022 as aggressive expansion during the pandemic created excess capacities that are still being utilised. Additionally, major players in the sector have acquired large-format, captive-owned spaces for their regional hubs. With the focus increasingly shifting towards profitability, e-commerce companies have concentrated on curbing costs as well as speculative expansion.

The top eight warehousing markets in India hold a warehousing stock of 462 msf. Mumbai is by far the largest market, constituting 40% of the total stock, with NCR being a distant second at 22%. Healthy transaction volumes, in tandem with comparatively lower supply in recent times, have brought down the vacancy levels to 9.3% in H1 2024. Vacancy levels in the markets of Mumbai, Pune and Ahmedabad now stand at 9.4%, 8% and 8.3% respectively.