Indian Warehousing Space Net Absorption to Boom Upto 42.5 mn sqft by 2022 With Demand on The Upswing

Net absorption of warehouse space in India is expected to reach 42.5 mn sq ft by the end of 2022, according to a forecast by JLL.The total vacancy rate drops significantly to reach 11.4% in H1 2022 as demand rises.

Indian warehouse demand has been on the upswing. A net absorption of 42.5 million square feet is expected in 2022, up from 39 million square feet in 2021, according to projections up to December 2022.

The demand from the 3PL/logistics industry has consistently been the highest across all time periods. Demand for e-commerce has skyrocketed over the last few years as a result of a shift in consumer behaviour away from traditional, brick-and-mortar stores.

However, e-commerce businesses' demand has slowed in H1 2022 since they have expanded sufficient capacity in 2021.

Grade A stock in India for 2021 stood at 134 million sqft, which translates to a 3-year CAGR of 27%, as reported by JLL in their research titled "India Warehousing Market: Present and Future."

Retail demand increased rapidly in H1 2022 thanks to growing disposable incomes and consumption-led demand. H1 2022 will also see robust growth in the engineering and auto and ancillaries sectors due to government incentives for manufacturers to attract MNCs and local investments.

The expansion of both the manufacturing and warehousing sectors, as well as the continued bullishness of investors, are the three key drivers of the logistics and industrial sector. We have witnessed substantial investments from both multinational corporations and local enterprises with aspirational ambitions to expand inside the manufacturing sector as a result of the government's ongoing efforts to encourage development via attractive policies.

Third-party logistics providers (3PLs), traditional retailers, and online marketplaces have all contributed to an explosion in warehouse space demands in both major urban hubs and smaller communities around the world (Tier I and Tier II cities, respectively). Two decades ago, the typical size of a Grade A warehouse was 80,000 square feet according to Sanjay Bajaj, MD (logistics and industrial) at JLL in India, "in 2016 to 160,000 sqft in H1 2022."

He said that there are plenty of private equity/Indian corporate developers interested in this market who want to create environmentally friendly, socially responsible, and technologically sophisticated business parks for its tenants.

After 5 years of relatively sluggish rental value growth for warehouses, the research claims that rising land and building costs in the first half of 2022 led to a price increase for warehouse space. In the first half of 2022, rent increased sharply, with the index rising to 129.

The total vacancy rate drops significantly to reach 11.4% in H1 2022 as demand rises. In addition, the Grade A vacancy rate hit 7.7% in H1 2022, and it is expected to decrease even more in 2025 due to the rising demand for high-standard, legally-compliant office space.

The Indian storage market has developed over time. It's no longer enough to have simple warehouses for storing goods; rather, warehouses need extremely complex warehousing management systems. As a direct consequence of this development, the average size of Grade A warehouses in India has increased by a factor of two.

In addition to a larger footprint, the average height of the warehouse has doubled from 9 metres in 2016 to 12 metres in 2021. Over the previous five years, the average volume of Grade A warehouses has tripled.

Since covid-19, the industrial and warehousing industry has seen a dramatic upturn. This is due to the improved position India now has in the global supply chain as a result of proactive government policy and robust consumer demand at home.