Warehousing market to record highest ever net absorption by 2022-end: report

[] By 2022-end, the market is expected to record net absorption of 42.5 million sqft as against 39 million sqft in 2021.

Demand for warehouses in India has seen improvement, with projections till December 2022 indicating a record net absorption of 42.5 million sqft in 2022 against 39 million sqft in 2021, shows a report by real estate brokerage firm JLL India.

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Logistics has remained the largest sector in terms of warehousing demand over the years, the report titled ‘India Warehousing Market: Present and Future’ points out while demand from e-Commerce has gained significant traction over the last few years. However, the demand from e-Commerce players has cooled down in H1 2022, given that e-Commerce players have added adequate capacity in 2021.

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“In terms of the warehousing sector, we have witnessed unprecedented growth driven by 3PL/ logistics players, retail, and e-commerce in Tier-I as well as Tier-II cities. The average sizes of Grade-A warehouses have increased by 2x from 80,000 sqft in 2016 to 160,000 sqft in H1 2022,” said Sanjay Bajaj, MD (Logistics and Industrial) India, JLL.

With rising disposable incomes and consumption-led demand, retail demand also expanded strongly in H1 2022. Engineering and auto and ancillaries are the other main drivers of demand in H1 2022, since manufacturing companies have been incentivised with favourable government policies to attract MNCs as well as domestic investments, it adds.

“There are three main drivers in the logistics and industrial sector: the growth witnessed in manufacturing, and warehousing sectors, and the keen interest shown by investors as they continue to remain bullish. Within the manufacturing sector, the government continues to incentivize growth via attractive policies, wherein we have seen significant investments from MNCs as well as domestic companies who have ambitious plans to ramp up,” he added.

Rentals move up…

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After slow growth in the warehousing rental values in the past 5 years, H1 2022 witnessed upward corrections in rentals due to increasing land prices and construction costs. The rent index in H1 2022 observed a significant jump reaching 129.

With the increasing demand in the market, there is a significant dip in overall vacancy to reach 11.4% in H1 2022. The Grade-A vacancy has also reached 7.7% in H1 2022, and is projected to reduce further in 2025 on the back of strong demand for quality and compliant spaces.

…so do sizes of warehouses in India

According to the report, the warehousing space in India has seen a shift from mere storage spaces to highly sophisticated management systems. This shift has resulted in a two-fold increase in the average size of Grade-A warehouses in the country. The warehouse size has expanded not only in terms of area but also in terms of average height, which has increased from 9 m in 2016 to 12 m in 2021. The average volume of Grade-A warehouses has grown by 3x over the past 5 years.

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Category: Lifestyle

Debora Berti

Università degli Studi di Firenze, IT

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