As per recent reports published by CREDAI & Anarock, equity investments of USD 3.8 billion would be needed to meet anticipated demand of 223 million square feet of warehousing space in India. This calendar year, Grade A warehousing supply is said to have risen by a CAGR of 10.6 per cent. Experts believe the sector currently has over USD 900 million in the form of ‘dry powder’ funding from existing commitments signifying a latent investment opportunity of almost USD 2.8 billion.
A recent report published on warehousing in India by CREADI & Annarock predicts the need for creation of approximately 223 million square feet of Grade A warehousing to meet growing demand. Experts believe that, in the coming three years, equity investments to the tune of USD 3.8 billion would be needed to support this scale of development.
According to the report, Grade A warehousing supply rose to 51 million square feet from 37.8 million square feet in 2021 at a compounded annual growth rate (CAGR) of 10.6 percent. Absorption of warehousing units grew by a CAGR of 12.6 percent from 2018 to 2021. Third-party logistics players (3PLs) remained top occupiers contributing to much of the country’s warehouse leasing, followed by sectors such as e-commerce, manufacturing and automotives.
The western markets of Mumbai Metropolitan Region (MMR) and Pune topped the leasing list, having cumulatively leased over 150 million square feet of space, with localities like Taloja, Panvel and Bhiwandi accounting for almost 41 percent of the share. Following in close suite are the southern cities of Chennai, Bengaluru and Hyderabad which cumulatively account for over 30 percent of the overall leasing volumes. The average rental yields range from Rs 27/- per square foot in MMR to Rs 20/- per square foot in Hyderabad. Third party logistic players claim the highest leasing space share at 42 percent in India.
According to another report published earlier this year by Colliers India, industrial and warehousing demand grew by 9 per cent YoY in the first three quarters of the calendar year 2022 with a total gross absorption of 17.5 million square feet across the top cities of the country. New supply is said to have declined by 20 percent YoY owning to high costs and input prices. This disparity along with delivery delays caused overall vacancy rates to dip by 0.7 percent in the last quarter indicating a possible increase in rental yields in the coming months within certain micro markets. The report suggests a net absorption of over 40 million square feet is likely to occur by the end the year.
Experts believe the sector currently has over USD 900 million in the form of ‘dry powder’ funding from existing commitments signifying a latent investment opportunity of almost USD 2.8 billion. Warehousing has immerged as a preferred asset class largely due to its short construction periods and lower risk when compared to other real estate asset classes. Government initiatives and policies such as the National Logistics Policy, PM Gati Shakti scheme, Production Linked Incentive (PLI), Atmanirbhar Bharat, etc. have encouraged and facilitated the expansion of this sector.
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