Business experts expect the warehousing sector to breach previous all-time highs by the end of this fiscal year. Even though there is an increase in material costs and global inflationary pressures, there is a demand for consumers that has resulted in a v-shaped recovery and good growth around double digits in the warehousing sector.
The first three quarters of this fiscal year witnessed an all-time high net absorption of 28 million sq. ft. of warehouse space. JLL India’s Chandranath Dey, head of the operation of logistics and industrial said that in 2019 there was a good growth of 48% with net absorption of 25 million sq. ft. Still, during the pandemic, the first three quarters witnessed net absorption drop to 13 million sq. ft. What we are seeing this year is the warehousing sector growing by 45% in the first three quarters and the net absorption at an all-time high of 43 million sq. ft. which shows that consumer demand has improved a lot.
Today, the rentals are also witnessing a hike along with an increase in raw material costs and global headwinds, but the demand has only increased across the country due to increased traction. The warehousing rentals were quite stable during the pandemic, but they rose to 3 to 4% between 2021 and in 2022, and the number of occupants has increased in the warehousing space. The industry expert report says that warehousing rents in Bengaluru, Mumbai, and Delhi NCR increased by an average of 7.2% wherein Delhi-NCR and Mumbai have topped the rentals limit. Also, the largest share in the total space is taken by 3PLs, electronics & white goods, pharma, and auto spare parts segments. Even the demand for warehousing in Tier-2 and 3 cities has gained momentum post-Covid and the last-mile delivery has witnessed an increase with the change in the consumer pattern and preferences. The factors driving the growth in these tiers are low rentals, cheap manpower, low capitalization, and high vacancy levels.
Besides, the government initiatives such as NLP, PLI (Production Linked Incentives), GST, and Gati Shakti have increased the logistics and warehousing demand across the country. Along with the Make in India, Atmanirbhar Bharat and Vocal for the Local program have provided a boost to the logistics and warehouse operation resulting in demand in warehousing spaces and operations and is anticipated to grow.