3PL, manufacturing sectors drives high warehouse demand in India

15 Jun 2023 CW Team

Knight Frank, a property consultancy, published the India Warehousing Market Report – 2023, which attributed the surge in demand primarily to the third-party logistics (3PL), manufacturing, and retail sectors. Among these, the 3PL sector observed the highest rise in demand, marking a 34 per cent increase from the previous year. The manufacturing sector also saw significant growth, with a 23 per cent year-on-year (YoY) increase.

However, the e-commerce sector faced a decline in demand during FY23. This was mainly due to the capacity built in previous years to accommodate the surge in consumption during the pandemic, as well as a gradual shift towards flexibility. The report stated that the volume of transactions in the e-commerce sector experienced a 71 per cent YoY decline in FY23. However, this decline is expected to be temporary, as secondary activity is likely to revive once the excess capacity is utilised in the coming year.

The report highlighted that India has benefited from the ongoing trend of companies decentralising their manufacturing capacity from China. Apple, for example, now manufactures seven per cent of its iPhones in India, a significant increase from the meager one per cent in 2021. The report credited the government's "Make in India" initiative and the production-linked incentive (PLI) scheme for boosting the prospects of the manufacturing industry in the country.

While Mumbai and the National Capital Region (NCR) led the market in terms of overall transaction volumes in FY23, Bengaluru and Kolkata witnessed the highest growth in annual transacted volumes, with a 25 per cent and 18 per cent YoY increase, respectively. The growth in the warehousing market is not limited to the top eight cities but has extended to secondary markets as well, supported by improved infrastructure such as highways, railways, and air transportation. The report emphasised the emerging importance of 3PL providers and manufacturing companies as primary players in the industry.

However, the report also noted that inflation in the cement and steel sectors has led to an increase in warehouse rents. During FY23, the top eight cities in India experienced a rise in warehouse rent ranging from three to eight per cent, with Bengaluru witnessing the highest increase of eight per cent. NCR followed with a seven per cent rise, while Ahmedabad saw a five per cent increase.

A report revealed that the demand for warehouses in the top eight cities in India reached an unprecedented level of 51.3 million square feet (MSF) in the fiscal year 2022-23 (FY23). Mumbai, Bengaluru, and Kolkata witnessed an all-time high in demand. Overall, the country experienced a 24 per cent increase in demand compared to FY22.Knight Frank, a property consultancy, published the India Warehousing Market Report – 2023, which attributed the surge in demand primarily to the third-party logistics (3PL), manufacturing, and retail sectors. Among these, the 3PL sector observed the highest rise in demand, marking a 34 per cent increase from the previous year. The manufacturing sector also saw significant growth, with a 23 per cent year-on-year (YoY) increase.However, the e-commerce sector faced a decline in demand during FY23. This was mainly due to the capacity built in previous years to accommodate the surge in consumption during the pandemic, as well as a gradual shift towards flexibility. The report stated that the volume of transactions in the e-commerce sector experienced a 71 per cent YoY decline in FY23. However, this decline is expected to be temporary, as secondary activity is likely to revive once the excess capacity is utilised in the coming year.The report highlighted that India has benefited from the ongoing trend of companies decentralising their manufacturing capacity from China. Apple, for example, now manufactures seven per cent of its iPhones in India, a significant increase from the meager one per cent in 2021. The report credited the government's Make in India initiative and the production-linked incentive (PLI) scheme for boosting the prospects of the manufacturing industry in the country.While Mumbai and the National Capital Region (NCR) led the market in terms of overall transaction volumes in FY23, Bengaluru and Kolkata witnessed the highest growth in annual transacted volumes, with a 25 per cent and 18 per cent YoY increase, respectively. The growth in the warehousing market is not limited to the top eight cities but has extended to secondary markets as well, supported by improved infrastructure such as highways, railways, and air transportation. The report emphasised the emerging importance of 3PL providers and manufacturing companies as primary players in the industry.However, the report also noted that inflation in the cement and steel sectors has led to an increase in warehouse rents. During FY23, the top eight cities in India experienced a rise in warehouse rent ranging from three to eight per cent, with Bengaluru witnessing the highest increase of eight per cent. NCR followed with a seven per cent rise, while Ahmedabad saw a five per cent increase.