Small , Flexible Warehouses Beyond Large Cities Emerged as New Growth Drivers

The year 2024 was a growth-oriented year for industrial and logistics sector, marked by substantial increase in warehousing leasing and rental values across key micro-markets, as institutional investors -backed developers played a key role in driving growth, focusing on state-of-the-art warehouses.

India’s industrial and logistics (I&L) leasing activity demonstrated remarkable growth, reaching 27.5 mn. sq. ft in the first nine months of 2024. According to a CBRE report, regions of Delhi-NCR, Kolkata, and Bengaluru collectively accounted for approximately 61% of the total space take-up. Third-party logistics (3PL) players dominated the market, securing a substantial share of around 39%, as businesses increasingly outsourced their storage and delivery operations to reduce lead times and optimize operational costs. Engineering & manufacturing (E&M) and retail sectors also played significant roles, contributing to an additional 30% of total warehousing space absorption.

According to Anshuman Magazine, Chairman & CEO- India,South East Asia, Middle East & Africa, small-sized transactions, particularly those under 50,000 square feet, became the predominant driver of warehousing leasing activity in 9M 2024, with their share in total transactions rising to 46%, up from 42% during the same period in 2023. This shift reflects a growing demand for smaller, more flexible warehouse spaces, often catering to emerging businesses and those seeking to optimize distribution networks.

In terms of supply, approximately 26.7 mn. sq. ft of industrial and logistics space was delivered in the first nine months of 2024, with Chennai, Bengaluru, and Delhi-NCR together accounting for roughly 50% of the overall development completions. Institutional investor-backed developers continued to play a key role in driving growth, capturing around 36% of the overall supply. “These developers have focused on launching state-of-the-art warehouses, featuring sustainable and technologically advanced facilities, meeting the evolving needs of modern businesses. The rise of these advanced warehouses, coupled with escalating land costs, has contributed to a steady increase in warehousing rental values across key micro-markets, with year-on-year growth ranging between 2-14% from Jan-Sept’24”, says Anshuman Magazine.

The industrial and logistics markets in India’s top eight tier-II cities remained resilient, with Chandigarh, Hosur, and Jaipur leading in both supply and absorption activity. These cities have increasingly become attractive for investors and occupiers seeking to expand beyond the major metropolitan areas, benefiting from improving infrastructure and rising disposable incomes.

Looking forward, warehousing leasing activity in key markets such as Delhi-NCR and Bengaluru is expected to accelerate, fuelled by an increase in new inquiries, the introduction of high-quality supply, and the finalization of pending transactions. As disposable incomes continue to rise and infrastructure development progresses, both investors and occupiers are projected to further expand into tier-II and tier-III cities. Chandigarh, Hosur, Jaipur, Lucknow, and Vizag are emerging as key markets with strong growth potential in the coming quarters.

Warehouse rentals, according to Anshuman Magazine, are expected to continue increasing on an annualised basis . This would largely be driven by the premium commanded by upcoming investment-grade assets in prime locations, coupled with rising land and input costs. In select micro-markets witnessing sluggish occupier appetite, developers could offer incentives to aid transaction closures.