In the first half of 2024, India's warehousing sector had an 8% year-on-year rise in absorption, totalling 16.6 million square feet, despite a 26% reduction from the second half of 2023 due to a 74% decline in the National Capital Region. Mumbai and Pune led demand, accounting for 63% of total absorption, while Chennai saw a 191% increase thanks to a low base effect. Foreign investors drove investments in the sector, which totalled USD 1.6 billion, a 4.5-fold increase from the previous year. Experts foresee more growth as a result of government initiatives targeted at lowering logistical costs and improving infrastructure.
The Indian warehouse sector showed flexibility in the first half (H1) of 2024, with total absorption of 16.6 million square feet, representing an 8% rise over the same time in 2023. However, this figure marked a 26% decrease from the second half (H2) of 2023, owing mostly to a huge 74% drop in demand in the National Capital Region (NCR). The Mumbai and Pune regions were the standout performers, accounting for 63% of total storage space consumed in H1 2024, driven mostly by increased demand for grade-A warehouses in Bhiwandi, Panvel, Uran, Taloja, and Ambernath.
Mumbai's share of warehousing space absorption surged from 25% in H1 2023 to 41% in H1 2024. Conversely, NCR's contribution dropped from 31% to a mere 6% during the same period. The decline in NCR's absorption rates played a significant role in the overall reduction of warehousing demand in India compared to H2 2023. Chennai, however, bucked the trend, recording a 191% increase in absorption, totalling 1.5 million square feet in H1 2024, primarily due to a low base effect from the previous year.
Demand from diverse sectors in the storage industry also experienced significant shifts. Third-party logistics (3PL) providers continued to dominate the market, accounting for 39% of total absorption in H1 2024, up from 26% the previous year. The Engineering & Manufacturing and Automobiles & Auto Components sectors also expanded significantly, with shares rising from 16% and 4% in H1 2023 to 22% and 9% in H1 2024, respectively. These developments highlight the industries' expanding needs for efficient and sophisticated warehouse solutions as they expand across the country.
Investments in the warehousing sector reached a substantial USD 1.6 billion in H1 2024, representing 42% of the total institutional investment received by the Indian real estate sector during this period. This inflow of capital marks a 4.5-fold increase compared to H1 2023, reflecting the sector's growing attractiveness to both domestic and foreign investors. The warehousing sector alone attracted one-third of the total institutional investment received in the past four years, highlighting its critical role in the broader real estate market.
The participation of foreign investors has been a significant driver of this investment surge, as global economies began to expand once again. As investment flows into the sector increased, the availability of funds eased, enabling more developments and expansions. Shrinivas Rao, CEO of Vestian and a Fellow of the Royal Institution of Chartered Surveyors (FRICS), noted that recent government initiatives aimed at boosting infrastructure development are expected to further reduce logistics costs from 8-9% to 5-6% of GDP. This reduction is anticipated to stimulate additional real estate activities within the warehousing sector, positioning it for sustained growth in the coming years.
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