The latest report by JLL, reveals a significant surge in India's warehousing sector, with total stock reaching 371 million sq. ft by 2023, a 15% YoY growth. Major cities like Delhi NCR, Mumbai, and Bengaluru contribute over half of this stock. The demand for Grade A spaces, driven by hygiene concerns amid COVID-19, led to a net absorption of 40 million sq. ft in 2023. Pune led in absorption with 8 million sq. ft. Overall vacancy rates declined to 15% in 2023 and are expected to further reduce to 8% by 2027, with Grade A vacancy rates projected to remain below 5%. The industry is poised for robust growth, with a projected CAGR of 12% in total warehouse stock and 16% in Grade A stock by 2027.
The latest report by JLL titled 'Exploring India's Thriving Logistics and Warehousing Landscape,' was unveiled at LogiMAT India 2024 in Delhi NCR. The report reveals significant growth in India's warehousing sector. By the end of 2023, the total warehousing stock encompassing Grade A and B spaces, across eight key cities surged to 371 million sq. ft, marking a notable increase from 329 million sq. ft recorded a year earlier. This growth represents a 15% Year-on-Year (Y-o-Y) uptick in total stock within Grade A & B warehousing space in these cities.
Delhi NCR, Mumbai, and Bengaluru, the country's three largest cities, contribute more than half of the total warehousing stock among the eight major cities. In 2023, the net demand for warehousing space soared to 40 million sq. ft, with approximately 70% of this demand observed in Grade A spaces. This trend reflects a shift in occupiers' preferences toward quality spaces, driven by enhanced hygiene and safety norms amid the COVID-19 pandemic.
Pune emerged as a frontrunner in absorption, witnessing the highest net absorption of 8 million sq. ft, fuelled by escalating manufacturing demand propelled by governmental initiatives such as Make in India and Production Linked Incentives Schemes. Mumbai and Delhi NCR closely followed Pune, each recording a net absorption of around 7 million sq. ft.
With increasing market demand, there has been a marginal decrease in the overall vacancy rate, which has dropped to 15% in 2023 and is expected to further decline to 8% by 2027. Grade A vacancy rates witnessed a significant decrease from 7% in 2022 to 5% in 2023 and are projected to remain below 5% in 2027 due to strong demand for quality and compliant spaces.
Rentals experienced an upward correction in 2022 and 2023 after a period of sluggish growth over the past five years, primarily attributed to escalating land prices and construction costs. The overall rent registered a 6% year-on-year growth rate from 2021 to 2023.
The 3PL/Logistics sector continued to dominate warehousing space demand, while manufacturing sectors like Engineering and Auto and Ancillaries experienced a resurgence post-COVID lockdowns, supported by government initiatives like Make in India. Demand from Retail and FMCG sectors remained consistent in 2023 due to rising disposable incomes and consumption-led demand. E-commerce space demand witnessed a surge in recent years due to a shift in consumer behavior towards online shopping, accelerated further during the COVID-19 pandemic.
As the Indian economy rebounds strongly from the pandemic's impact, the logistics and warehousing industry is poised for robust growth, driven by evolving consumer demands, the expanding presence of 3PL companies, and increased traction in manufacturing sectors. Over the next three years, the warehouse stock in India is projected to experience a Compound Annual Growth Rate (CAGR) of 12%, reaching 595 million sq ft by 2027, with Grade A stock expected to witness a CAGR of 16%, reaching 345 million sq ft by 2027. This growth is underpinned by occupiers' growing preference for superior-quality spaces, contributing to a consistent reduction in Grade A vacancy rates and an upward trajectory in rental prices.
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