India's Grade A warehousing market is experiencing unprecedented growth, with leasing expected to exceed 45 million square feet in 2024. The first half of the year saw demand outpacing supply, resulting in a record low vacancy rate of 8.2%. Key regions like the Mumbai Metropolitan Region, Pune, and NCR account for 64% of the demand, while Bengaluru noted a remarkable 25% increase in supply. Despite high demand, Pune faces a supply shortage with a 2x demand-to-supply ratio, indicating significant development potential. The overall warehousing stock is projected to surpass 300 million square feet by 2025.
India's Grade A warehousing market is currently experiencing an extraordinary surge, with unprecedented demand indicating the growing strength of the country's logistics and industrial sectors. A report by CREDAI and CRE Matrix revealed that the leasing of premium warehousing spaces is expected to exceed 45 million square feet in 2024, with the first half of the year reaching 20.3 million square feet and projections for the second half suggesting a rise beyond 25 million square feet.
The report highlighted that the leasing figure of 20.3 million square feet in the first half of 2024 significantly outstripped the new supply, which was recorded at 14.8 million square feet. This segment also witnessed its lowest-ever vacancy rate of 8.2%, showcasing the rapid growth trajectory of the industry. This expansion is primarily driven by key regions, including the Mumbai Metropolitan Region (MMR), Pune, and NCR, which collectively account for 64% of the total demand.
The report pointed out regional trends, noting a 25% increase in Grade A supply in Bengaluru between the first and second quarters of 2024, marking the first time such a steep rise has been observed in the city. This illustrates the steady development of warehousing infrastructure there. Pune has also experienced exceptionally high demand for Grade A warehousing space, significantly contributing to the overall market demand. In the first half of 2024, Pune alone accounted for 48% of the total demand recorded in the MMR-Pune region.
Despite the surge in demand, Pune is grappling with a supply shortage, as the demand-to-supply ratio has reached 2x. This suggests potential for considerable new development in the forthcoming quarters. Likewise, Chennai reported a demand-to-supply ratio of 1.6x, underscoring the increasing appeal of its logistics infrastructure. With a vacancy rate of only 7.4%, the city is positioned to continue its upward trend as more industries seek to establish a foothold in this essential southern market. This development also signals the region's emerging status as a logistics and manufacturing hub.
Due to the widening gap between the surging demand for high-quality warehousing, warehousing rental rates in the first half of 2024 rose by 4% year-on-year across the country. The ongoing demand is chiefly driven by sectors such as third-party logistics, manufacturing, and electronics, which together account for nearly two-thirds of the demand for Grade A spaces. India's Grade A warehousing stock is anticipated to surpass 300 million square feet by 2025, up from the current total of 238.5 million square feet, providing an optimistic outlook for stakeholders.
The remarkable growth of India's Grade A warehousing market underscores the increasing demand driven by key sectors such as logistics, manufacturing, and electronics. With significant leasing activity and a record low vacancy rate, the market presents promising opportunities for stakeholders. However, challenges such as supply shortages in regions like Pune indicate a pressing need for new developments to meet the soaring demand. As the industry evolves, the projected expansion of warehousing stock to over 300 million square feet by 2025 reflects a vibrant future for India's logistics landscape.
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