In the first half of 2024, India's warehousing sector absorbed 16.6 million square feet, an 8% increase from H1 2023 but down 26% from H2 2023, with NCR seeing a sharp 74% decline. Mumbai and Pune led with 63% of total absorption, while southern cities, especially Chennai, saw significant gains. Investment surged to USD 1.6 billion, 42% of total institutional real estate investment in India, driven by foreign interest and economic recovery. Notable deals include Reliance Retail Ventures' USD 1.5 billion investment and new projects like TVS Industrial's USD 15.6 million logistics park in Goa.
The warehousing sector in India has shown significant activity in the first half of 2024. Total space absorbed reached 16.6 million square feet, reflecting an 8% increase from the same period in 2023. However, this figure marks a notable decline of 26% compared to the second half of 2023, primarily because of a steep 74% drop in absorption in the National Capital Region (NCR). Despite these fluctuations, the warehousing market demonstrates resilience and adaptability in response to changing economic conditions.
A closer look at the data reveals that Mumbai and Pune are emerging as key players in the warehousing landscape, together accounting for 63% of the total absorption. Mumbai's share alone surged from 25% in H1 2023 to 41% in H1 2024. This increase is largely due to a rising demand for grade-A warehouse spaces in regions like Bhiwandi, Panvel, Uran, Taloja, and Ambernath. Meanwhile, the decline in NCR-where its market share plummeted from 31% to just 6%-highlights the shifting dynamics of regional demand as businesses increasingly favor locations with better logistics and infrastructure.
The southern cities, including Bengaluru, Chennai, and Hyderabad, contributed 29% of the total absorption during this period. Notably, Chennai reported a remarkable absorption increase of 191% over H1 2023, driven primarily by a low comparative base. This trend suggests that southern markets are gaining momentum, attracting businesses looking for reliable logistics infrastructure.
Investment in the warehousing sector surged in H1 2024, with an impressive USD 1.6 billion influx, representing 42% of the total institutional investment in Indian real estate. This rise is attributed to renewed economic growth worldwide and a noticeable increase in foreign investments within the Indian warehousing sector. To put this into perspective, the current investment levels reached one-third of the total institutional investment seen over the last four years, with a dramatic increase of 4.5 times compared to H1 2023. This renewed confidence among investors is expected to fuel further growth in the sector.
Industry leaders highlight the significance of government efforts to enhance infrastructure as a critical factor for this growth. Shrinivas Rao, CEO of Vestian, noted that improved infrastructure could reduce logistics costs from 8-9% of GDP to 5-6%. Such reductions are likely to spur more companies to enter the warehousing market, further boosting real estate activity.
Several noteworthy transactions took place during this period. The largest deal involved Reliance Retail Ventures' warehousing assets, where KKR and Abu Dhabi Investment Authority (ADIA) invested USD 1.5 billion, representing 96% of the sector's total investments. Additionally, CapitaLand India Trust announced plans to acquire three industrial facilities in Chennai, valued at approximately USD 32.3 million, with anticipated completion by mid-2025.
Geographic diversification is also evident in new projects and agreements. The Goa Investment Promotion and Facilitation Board (Goa-IPB) signed an MoU with TVS Industrial and Logistical Parks to develop a grade-A logistics park in Verna Industrial Estate, aimed at enhancing the region's infrastructure with an investment of USD 15.6 million.
Even with these positive trends, rental prices reflect some fluctuations in the market. Average rents saw a slight decline of 3% to INR 21.6 per square foot per month. Bengaluru experienced the most significant drop at 8%, while Hyderabad saw a 7% decrease. In contrast, Pune emerged with a rental increase of 30%, reaching INR 27.1 per square foot, and Chennai experienced a 22% rise.
Overall, H1 2024 presents a picture of a shifting and evolving warehousing landscape in India. As the market adjusts to varying demands and conditions, investment and development opportunities remain strong. The interplay between regional dynamics, government initiatives, and market responses will shape the future of the warehousing sector for years to come.
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