Indian warehouse market witness healthy rise in demand

The growth of third-party logistics (3PL) companies, a sustained increase in demand driven by accelerating manufacturing investments, and aggressive e-commerce expansion have all contributed to rising warehousing rentals in India's major logistics property markets. According to the performance in 2022 and the promising outlook for 2023, the rise in rental values has propelled Indian cities like Mumbai, Bangalore, and Delhi-National Capital Region (NCR) into the list of the top 10 logistics markets in Asia Pacific. In terms of annual rental growth among these cities, Mumbai came in sixth place in the Asia-Pacific region. The city's rental rates in 2022 increased by 9.3% from a year earlier, to Rs 22 per sq ft per month, according to data from Knight Frank India. In 2023, an additional 1.1 million square feet of warehousing space is anticipated to become available in the Mumbai area. “The Indian warehousing market has seen a healthy rise in rentals on the back of robust growth in demand during the year. The manufacturing and 3PL sectors were the major growth drivers in 2022 and should sustain momentum in 2023 as well,” said Shishir Baijal, CMD, Knight Frank India. According to him, the market will likely respond to the increased base level expectations from occupiers as well as a positive outlook for demand, which will cause the healthy rent growth seen in 2022 across all markets after years of stagnation. Except for Bangkok, where rent contracted by 0.1% during the year, marking the first decrease in rent since the start of the pandemic, prime logistics rents across 17 important Asia Pacific markets were stable or rising. With an average annual growth rate of 12.9%, Australasia continued to outperform other markets. Sydney had the highest annual growth rate in the region for rental growth at 29.6%. Deteriorating sentiments resulted in negative rental growth registered for the first time since the pandemic. High interest rates and inflation are promoting companies to reassess or consolidate their inventory,” said Christine Li, head of research at Knight Frank Asia-Pacific. “On the upside, we still see strong demand for cold chain facilities, especially in Asia Pacific, as consumers continue to favour e-commerce grocery. Alongside the shortage of quality supply, logistics rents are still expected to grow in 2023, albeit tamed.” Among other Indian cities, Bangalore ranked 8th in the Asia-Pacific logistics markets based on annual rental growth. In 2022, rental prices in the city increased by 6.4% at Rs 20 per sq ft per month. In 2023, an additional 0.5 million square feet of warehouse space is anticipated to become available in the city. With a 5.9% increase in monthly rentals at Rs 19 per square foot, Delhi-NCR was ranked ninth in the region. In 2023, an additional 1.1 million square feet of warehousing space is anticipated to be made available in the city. The outlook for rentals is favourable for all three Indian cities in 2023. In the coming years, it is anticipated that the warehousing and logistics sector of the real estate market, which has proven to be relatively resilient to the shocks of COVID-19, will continue to grow and draw more investment. A favourable regulatory environment, supported by the government through reforms and policy, has begun to increase infrastructure spending in India, which has increased demand for modern warehousing as a whole. Due to the aggressive expansion of e-commerce and the rise of 3PL firms, the warehousing sector is anticipated to record the highest ever warehousing absorption this year. See also: Industrial and logistics sector grew 8% YoY in 2022: CBRE Gati Shakti will assist in lowering logistical barriers: DPIIT