The manufacturing sector has outperformed the traditional 3PL leader in warehouse leasing in India, signalling a significant industry shift, according to Knight Frank India's report. With 14.65 million sq. ft transacted in Q3 2024 and a 20% YoY growth, the sector's robust leasing volume-driven by automotive, energy, and chemical industries-highlights India's appeal as a decentralized manufacturing hub. Pune led market activity, while rental growth was fuelled by limited supply and increasing demand. Retail and e-commerce sectors also exhibited remarkable growth, broadening the warehousing market's base.
Knight Frank India's recent report underscores a transformative trend in India's warehouse leasing landscape: the manufacturing sector has eclipsed the 3PL (third-party logistics) sector in leasing volumes. This marks a pivotal moment as 3PL has traditionally dominated the Indian warehousing market. Between January and September 2024, manufacturing companies leased 14 million sq. ft, contributing 37% of total transactions.
The third quarter (July-September) of 2024 saw transactions reach 14.65 million sq. ft across eight major Indian markets, representing a 20% YoY growth. Year-to-date (YTD) volumes climbed to 37.54 million sq. ft, a 4% YoY increase. This growth reflects the resurgence of warehousing demand, as industries steadily expand their footprints.
Regional performance was diverse, with Pune leading at 23% of total warehousing volume, driven primarily by 3PL activity. The National Capital Region (NCR) followed with a 13% share, spurred by both 3PL and manufacturing transactions. Pune also emerged as the most expensive market, with average rents of INR 26.9 per sq. ft per month and a YoY rental growth of 4%, while Ahmedabad ranked second with a 3.5% YoY increase.
The rise of the manufacturing sector, led by automotive, energy, and chemical industries, signals India's growing prominence as a decentralized manufacturing hub. Industry giants like Apple, Samsung, and Foxconn have expanded their operations, contributing to this shift. Analysts noted that this change underscores the evolution of India's warehousing market, transitioning from a 3PL-centric model to a diversified ecosystem.
Meanwhile, the retail and e-commerce sectors have made significant strides, with transaction volumes growing by 35% and 34% YoY, respectively. Their combined market share now exceeds 20%, highlighting a broadening occupier base.
Despite a slight dip in market share, the 3PL sector witnessed an absolute YoY increase in transaction volume, underscoring sustained demand. Experts believe that balanced growth across sectors, coupled with limited supply, has kept vacancy rates at a healthy 10.3% as of Q3 2024.
With a total warehousing stock of 479 million sq. ft across eight cities, Mumbai remains the largest market, holding 31% of the stock, followed by the NCR at 21%. This sectoral reshuffle, paired with consistent demand, indicates a promising trajectory for Indian warehousing in the coming years. The Bengaluru market has the highest vacancy level at 18.9% followed by Hyderabad and the NCR at 14.6% and 14.5% respectively.
India's warehousing landscape is witnessing a significant shift, with the manufacturing sector surpassing 3PL in leasing volumes, driven by major industries like automotive and energy. This transformation, alongside substantial growth in retail and e-commerce, reflects a diversified market. With strong demand and a healthy vacancy rate of 10.3%, the future of Indian warehousing looks promising and resilient.
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