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Tracing the dynamic growth of the Warehousing Market in India

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Buoyed by the acceleration of e-commerce and 3PL, the warehousing market of India quickly jumped on the wagon of fast-paced recovery after the pandemic. Expected to grow to INR 2243.79 billion by 2026, expanding at a CAGR of 10.90%, as per the Warehousing Market in India 2022 Report, warehousing has emerged as a sophisticated industry, equipped with automation and mechanization for efficient operations. In this feature, we weigh the industry’s recovery and growth after the pandemic by taking into account the industrial leasing activity, warehousing stocks, and warehousing space. Further, the story observes net absorption in major cities, talks about the impact of government policies, addresses the challenges in construction, and notes the impact of the global supply chain.

One of the most crucial elements of the logistics and supply chain industry, the warehousing sector in India has not always enjoyed the sophisticated and significant status, as it does now. It has taken its sweet time to evolve from a highly fragmented storage space with smaller boxes having  constrained space with limited to zero scopes of automation or mechanization. The transformed and sophisticated warehouses of today, have a state-of-the-art infrastructure and have increased the average size of Grade A warehouses by 2 times. Moreover, the height of the warehouse has also increased from 9 m in 2016 to 12 m in 2021 leading to an increase in the average volume of Grade A by 3 times.

Warehouses are becoming cargo hubs to store goods for multiple clients, and rapidly growing in numbers, especially grade A spaces. High demand for spaces with high specifications and the introduction of new players in the market have spurred up this demand.

 In 2021, India witnessed a 21% y-o-y growth in total stock in Grade A & B warehousing space in the top eight cities. The overall warehousing space stands at 287 mn sq. ft. at the end of 2021 compared to 238 mn sq. ft. in the previous year. The stock has further increased to 307 mn sq. ft. in H1 2022. Interestingly, Grade A stock in India stood at 134 mn sq. ft. in 2021 translating to a 3-year CAGR of 27% from 66 mn sq. ft. in 2018.

India Warehousing Stock in Top 8 Cities (Mn Sq.ft.) India has several factors that have steered the growth of the warehousing sector.

Indian cities are among the largest urban centers globally with the urban population in India in 2020 at 34.9% expected to be doubled by 2025.

Reasoning the growth of the sector Rajat Garg, Head of Investment, ESR India, said, “We’ve seen a double-digit growth on an annualized basis over last 5 years since GST regime started.”

The introduction of policies and plans like GST has helped create wider access to warehousing space across the nation.  

 “National logistics policy and coherent state policies have been essential in accelerating and sustaining growth rate in the logistics industry. Complimenting the regulatory framework, the Government has initiated a range of infrastructure modernization and improvement plans along with the development of a new logistics network that would increase accessibility and logistics capacity utilization, facilitate intermodal transfers and transport cost optimization as well as assist in developing outbound and transhipment capabilities of trade gateways,”

Chandranath Dey, Head – Operations, Business Development, Industrial Consulting & Integrated Logistics, Logistics & Industrial, India, JLL.

 The warehousing market in India is expected to grow to INR 2243.79 billion by 2026, expanding at a CAGR of 10.90%, with the e-commerce marketplaces playing a critical role which was been rising in demand during COVID.

“The pandemic has played a significant role in the growth of the warehousing industry over the last three years. With the growing recognition of e-commerce platforms, there has been a great shift towards logistical upliftment including the demand for warehousing. Talking about some major growth drivers, the shift from offline to online shopping has played a key role in more and more e-commerce and 3PL companies wanting to lease warehousing spaces across the country.”

Anshul Singhal, Managing Director, Welspun One Logistics Parks

The warehousing and logistics sector has been the largest beneficiary during the COVID-19 pandemic and the share of the sector in terms of global investments in India has increased from 2% in 2020 to 20% in 2021 India’s cost advantage is all driving forces attracting a sizable foreign investment into the logistics, manufacturing, and warehousing sectors.

“The investment is more stable in terms of the consistency of rental as opposed to office spaces. Considering the potential of online sales, many businesses are switching to omnichannel business models and scrambling for additional warehouse capacity across cities. The occupancy rate for warehouses is also high because of their low cost. The tenants of a warehouse typically spend around nine to 15 years compared to commercial office leases, which have a lock-in period of around three to five years. A warehouse investment is, therefore, more reliable and stable,”

Sandeep Chadha, Partner & Managing Director of Pragati Warehouster.

“There is strong interest from large institutional investors and developers on the supply side, with increasing interest in participating in this massive Indian warehousing, industrial, and an infrastructure growth story that’s playing out. Hence, we expect the market growth trend to continue in the medium term,” Mr Garg said.

The warehousing industry of India, especially grade A spaces has emerged as a resilient asset class and continues to show an uptrend within the real estate sector.

Gross absorption in Grade A warehousing space during H1 2022 in top 8 cities (Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, NCR Delhi, Pune) stood at 13.4 million sq.ft. and net absorption at 12.6 million sq.ft. There is a 22% y-o-y increase in the Grade A absorption in H1 2022.

“Grade-A market is growing at ~2x the pace of Grade-B/C market. We see a clear trend of occupiers preferring space in organised industrial and logistics park that offer top drawer products, are compliant with all regulations, and add efficiency to their overall supply chain operations. As the share of supply from organised institutional players increases, we expect Grade-A stock to grow at an even faster clip over next 2-5 years,” Mr Garg stated.

WHAT DOES THE GROWTH SIGNIFY?

The growth signifies, the often talked about evolution of warehousing over the years from storage space to highly sophisticated warehousing spaces. It shows shift in occupiers’ preference towards quality spaces due to adherence to additional hygiene and safety norms during COVID-19.


This is an abridged version of the original story published in the September edition of the Logistics Insider magazine. To read the complete article, click here.

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