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Warehousing leasing across top eight1 markets of India has recorded a historic high in transactions in Financial Year (FY) 2022 at 51.3 million square feet (mn sq ft). Leasing transactions catapulted by 62% year-on-year (YoY) surpassing the previous, pre-covid peak, thus setting a fresh benchmark as occupiers revived expansion plans shaking off the last vestiges of the pandemic. While NCR and Mumbai led the market in terms of overall transaction volumes during FY 2022, Pune and Hyderabad witnessed the highest percentage growth in annual transacted volumes at 166% and 128% YoY respectively. This is as per Knight Frank India’s flagship report on Warehousing tilted ‘India Warehousing Market Report – 2022’ which has also assessed the warehousing activities in 18 secondary markets across India.

Almost all sectors have demonstrated phenomenal growth in warehousing demand during FY 2022. The Third-Party Logistics (3PL) sector, which constituted 31% of all transactions, leased 14.9 mn sq ft of warehousing space, registering a 50% YoY growth. This was followed by ‘other manufacturing’ 2 sectors and e-commerce. The e-commerce sector grew by 17% YoY in FY 22. The sector, which was previously the highest lessor of warehouse continued its surged, albeit at a lower rate, mainly due to the already large capacities built up in the previous years. This occupier group is expected to return to its steep demand trajectory once these capacities are taken up in the current period.

Companies from the manufacturing sector such as automobile and pharmaceutical, constituting the ‘Other Manufacturing’ sector, were the second most prolific occupier group with transaction volumes of 14 mn sq ft registering a growth of 92% YoY. The retail sector saw the most growth in space transacted at 316% YoY, which amounted to 5.6 mn sq ft in FY 2022. Retailers had to quickly add warehousing capacities to cater to the swift rise in demand. With mobility restored to normalcy during FY 2022, consumer demand rebounded in the hard format stores and had a direct bearing on the warehousing space take-up of the retail sector.

Shishir Baijal, Chairman and Managing Director, Knight Frank India said, “The high growth rate of organised warehousing sector in India is a result of its rising GDP and consumerism. With warehouse leasing in India surpassing the pre-pandemic level, the sector is poised to take a quantum leap to match its more mature peers around the world. This will be supported by the ever-increasing institutional interest in owning, developing, and operating warehouse assets ensuring professional expertise to direct the course of this growing market as it matures. In terms of investment, the warehousing sector has received private equity of US$ 1.2 Bn in H1 2022, as against US$ 1.3 Bn that the sector received in the entire year of 2021, adequately demonstrating the confidence global and Indian investors have on the sector’s future.”

Shishir further added, “Government’s push towards development of infrastructure and India’s new Logistics Policy will help in the surge. With the strong demand recorded in the secondary markets, the warehousing momentum is gaining shape even beyond the top 8 markets in the country and the development of Multi Modal Logistics Parks will further create more warehousing zones covering the geographic expanse of the country.”

Occupiers continued to show a marked preference for Grade A properties which accounted for 64% or 32.8 mn sq ft of the total transacted volume in FY 2022. The inherent operational efficiencies, adherence to safety standards and better contingency planning are some of the factors that continue to draw occupier interest.

The report highlights that the stock of Grade A warehousing facilities grew significantly during the year, currently constituting 37% of the total stock compared to 35% in FY 2021. Chennai (76%) and Pune (70%) have the highest concentration of Grade A stock due to their primary demand base of auto and auto ancillary occupiers. The older markets of Mumbai, Ahmedabad and NCR have a significantly lower proportion of Grade A warehouses with 18%, 31% and 36% respectively. Six out of eight markets witnessed an increase in the share of grade A stock in FY 2022 compared to the previous year.

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