Demand for dark store space in India is on the rise, driven by the growth of Q-commerce, which promises rapid delivery within 15 to 30 minutes. A joint study by JLL and Miebach Consulting reveals that dark store demand reached 24 million square feet in 2023, with projected growth to 37.6 million by 2027. Dark stores, often located in underutilized urban areas, help Q-commerce companies cut logistics costs by 10-30%. However, challenges exist, including regulatory compliance and hygiene standards. The expansion of Q-commerce into Tier-II and Tier-III cities offers substantial opportunities for real estate, introducing a promising new asset class.
A joint study by JLL and Miebach Consulting reveals that in 2023, the demand for dark store space in India reached 24 million square feet. This demand is expected to grow at a compound annual growth rate of 12%, reaching 37.6 million square feet by 2027. Dark stores are small urban fulfillment centers, typically ranging from 2,500 to 4,000 square feet, strategically located in densely populated areas.
Quick-commerce (Q-commerce) companies view dark stores as a way to reduce logistics costs and enhance last-mile delivery efficiency. However, urban real estate costs for logistics do not align with typical retail rental rates. Consequently, urban logistics spaces in Indian cities are most effective when set up in low-cost brownfield sites, such as unused industrial buildings Underused parking areas, mixed-use buildings, and other smaller spaces are being adapted as in-city warehouses, given the scarcity and high cost of land. According to JLL, Q-commerce players can potentially reduce logistics costs by 10 to 30 percent with such setups.
Today, quick, just-in-time (JIT) deliveries are in demand not only for B2C but also for B2B customers, who now expect orders to be delivered directly to their locations, as said by Srinivas N, managing director of industrial and logistics at Savills India. This trend has greatly increased the demand for leasing dark stores in densely populated urban areas, especially in the central business districts (CBDs) and secondary business districts (SBDs) of major cities .He added that this trend is also spreading to Tier-II and Tier-III cities.
However, there are challenges regarding property hygiene standards and accessibility. Many sites do not meet regulatory requirements, and numerous dark stores are facing scrutiny over compliance and hygiene issues as noted by Rao .
Vimal Nadar, senior director and head of research at Colliers India, observed that Consumer expectations are now shaped by the demand for faster deliveries and the familiarity with online shopping. Dark stores are strategically placed to enable Q-commerce platforms to deliver within 15 to 30 minutes. Vimal Nadar, senior director and head of research at Colliers India, explained that Q-commerce platforms are able to fulfill deliveries within 15 to 30 minutes.
Nadar added that rising consumer demand and the growing need for dark stores by Q-commerce companies will create a demand for new spaces, pushing these companies to expand their networks. This trend is advantageous for the real estate sector, as it introduces an additional asset class with significant growth potential, given consumers' increasing preference for online shopping.
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