Warehousing Demand Surpasses Supply

Owing to rapid industrial growth and the emergence of one of the fastest growing real estate segments in the country, India’s Warehousing sector is set to cross the 300 million square feet (MSF) mark by 2025.

Currently, the overall Grade A warehousing stock stands at 216.2 MSF. In Q1 CY ’24, India witnessed a 5 percent increase in rentals – reflecting how India’s warehousing demand continues to surpass supply – with the absorption to supply ratio standing at 1.4 in the quarter.In a nation-wide study by Credai- CRE Matrix , it was noted that Pune and NCR’s contribution to the pan India Grade A/A+ warehousing demand was 45 percent while MMR and NCR jointly had a demand touching 53 percent in the segment. As compared to Q1 CY’23, MMR alone had a 52 percent  increased supply in Q1 CY ’24.

The various industries that made the most impact to achieve this growth are 3PL – Third Party Logistics (27 percent), Manufacturing (20 percent), and E-Commerce (12 percent ). This quarter has also seen a 1.2 percent  decline in Grade A/A+ vacancy levels of Warehousing across top 6- cities as compared to Q1 CY’23.

The various data points culled out by this report point towards how India has revamped its outlook toward the warehousing sector over the last decade to reform from unorganized godown structures to a prominent asset class. Given the high growth potential, better inflation outlook, government’s thrust on policy implementation, lower manufacturing costs, and availability of low-cost labour compared to developed countries, India stands as an attractive investment destination.

Sharing his insights from the report,   Boman Irani, President, Credai National  said , “The Indian Real Estate sector’s strong fundamentals mirror India’s economic growth, as evidenced by the exponential rise of specialized segments like warehousing. Q1 CY ’24’s 5 percent rental increase highlights the demand surge in this evolving asset class. With e-commerce, retail expansion, and global companies entering India, we foresee a robust demand and supply growth for Grade A warehouses. Pune, NCR, and MMR lead this transformation, with India’s favourable policies, competitive manufacturing costs, and ample labour making it as a prime investment destination.”

Warehousing as an asset class has been a preferred sector for many investors & developers alike to balance their real estate portfolio as the production is faster and generates higher revenues with lower risks. Hence, the warehousing demand is expected to continue to grow in the future due to an increasing demand resulting from increased consumption. Unceasing policy support from the government in the last few years including infrastructure status to the logistics sector, GST implementation, and permitting 100 percent FDI in warehousing & storage has also been crucial in attracting investments in this sector.

  Abhishek Kiran Gupta, CEO & Co-Founder , CRE Matrix & Index Tap  shared  his insight, “We are building highways at unprecedented speed and state governments have simplified laws to set up warehousing facilities. But that takes care of supply only. On the demand side, India’s middle class income and population is booming at a faster pace than China and is central to our goal of becoming $5 Trillion in next 3 years. That’s why we believe India’s consumption story has just begun. Today India’s Warehousing Stock is 1/5th of China and this booming Indian middle class needs more storage space than ever before. We are on the right track to achieve Grade A completions of 85 msf in the next 7 quarters to end 2025 with a 300 msf Grade A Stock milestone.”