Warehousing Sector in India Sees Mixed Growth and Regional Shifts in H1 2024

India’s warehousing and logistics sector experienced a mixed bag of growth and regional shifts in the first half of 2024. The sector absorbed 16.6 million square feet, an 8% increase from H1 2023, but a 26% decline from H2 2023. This fluctuation was largely due to significant changes in regional demand, particularly a sharp drop in the National Capital Region (NCR).

Mumbai and Pune emerged as the dominant markets, accounting for 63% of total absorption. Mumbai’s share surged from 25% in H1 2023 to 41% in H1 2024, driven by increased demand for grade-A warehouses in areas like Bhiwandi, Panvel, and Uran. In contrast, NCR’s share plummeted from 31% to 6%. Southern cities, including Bengaluru, Chennai, and Hyderabad, contributed 29% to total absorption, with Chennai seeing a remarkable 191% increase over H1 2023.

The Third Party Logistics (3PL) sector led the demand, commanding a 39% share in H1 2024, up from 26% in H1 2023. Engineering & Manufacturing and Automobiles & Auto Components sectors also saw increased shares, rising to 22% and 9% respectively.

Investments in the sector reached $1.6 billion, representing 42% of total institutional real estate investment. This surge was fueled by global economic expansion and increased foreign investment. H1 2024 investment levels were equivalent to one-third of the total institutional investment received over the past four years, marking a 4.5-fold increase compared to H1 2023.

Also Read:-Green Revolution on Wheels: LNG Trucks Transforming Steel and Cement Logistics

Shrinivas Rao, CEO of Vestian, noted the easing availability of funds due to increased foreign investor participation. He highlighted recent government initiatives aimed at reducing logistics costs from 8-9% to 5-6% of GDP, which are expected to boost real estate activities in the warehousing sector.

Key investment deals included a $1.5 billion investment by KKR and Abu Dhabi Investment Authority in Reliance Retail Ventures’ warehousing assets, accounting for 96% of total sector investments. Other notable deals involved CapitaLand India Trust’s forward purchase agreement with Casa Grande Group and Goa Investment Promotion and Facilitation Board’s MoU with TVS Industrial and Logistical Parks.

Weighted average rentals in H1 2024 declined by 3% to Rs 21.6 per square foot per month compared to H1 2023. Bengaluru and Hyderabad saw the highest rental declines, while Pune and Chennai experienced significant increases.

This period showcased the dynamic nature of India’s warehousing sector, with regional shifts in demand, evolving sectoral preferences, and substantial investment inflows shaping its landscape.

Source By:- https://businessworld.in/