With steady surge in demand from the third party logistics companies, net absorption in the country’s warehousing market is expected to touch a record high this year. Net absorption in 2022 to grow to a record 42.5 million square-feet (sq.ft.) - up 17 per cent from the pre-COVID highs of 36.3 million sq.ft. in 2019, said the global real estate services firm JLL.
According to it, third party logistics and/or logistics has remained the largest sector in terms of warehousing demand over the years. Due to a behavioural change among consumers - making offline purchases to online - demand for e-commerce has gained significant traction as well.
“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 of India continues to incentivise growth via attractive policies, wherein we have seen significant investments from MNCs as well as domestic companies who have ambitious plans to ramp up. In terms of the warehousing sector, we have witnessed unprecedented growth driven by third party logistics and/or 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 two times - from 80,000 sq.ft. in 2016 to 160,000 sq. ft. in H1 2022,” said Sanjay Bajaj, Managing Director - Logistics & Industrial, India, MD, Pune, JLL.
With the increasing demand in the market, there is overall vacancy has dipped significantly to reach 11.4 per cent in the first half of 2022. Grade A vacancy has also reached 7.7 per cent in H1, 2022 and JLL projections shows it reducing further by 2025 on the back of strong demand for quality and compliant spaces.
According to analysts, warehousing market in India is evolving fast. There is a clear shift from mere storage spaces to highly sophisticated warehousing management systems. The shift towards sophisticated, cutting-edge storage has resulted in a two-fold increase in the average size of Grade A warehouses in India.
The warehouse size has expanded not only in terms of area but also in terms of average height, which has increased from 9 meters in 2016 to 12 meters in 2021. While the average volume of Grade A warehouses has grown by three times over the past 5 years.
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