Warehousing and Logistics Absorption Grows by 8 per cent in H1 2024, Boosted by USD 1 Billion plus Investment Surge

The warehousing and logistics sector in India witnessed a promising uptick in H1 2024, with total absorption increasing by 8% compared to the same period in 2023. According to a recent report by Vestian Research, the sector absorbed a total of 16.6 million square feet in the first half of 2024. However, when compared to H2 2023, there was a notable 26% decline in absorption, which can be largely attributed to a significant 74% drop in absorption in the National Capital Region (NCR).

Key Insights:

Annual Absorption Growth:

H1 2024 recorded a total absorption of 16.6 million sq. ft., reflecting an 8% increase compared to H1 2023. However, this figure represented a 26% decline from H2 2023, largely due to a steep 74% drop in NCR’s absorption.

Regional Performance:

Mumbai and Pune were the top contributors, together accounting for 63% of the total absorption in H1 2024.

Southern cities like Bengaluru, Chennai, and Hyderabad contributed 29% to the overall absorption.

Mumbai's share surged from 25% in H1 2023 to 41% in H1 2024, driven by increased demand for Grade-A warehouses in areas like Bhiwandi, Panvel, Uran, Taloja, and Ambernath.

NCR’s absorption share plummeted from 31% to 6% over the same period.

Chennai's absorption skyrocketed by 191% to 1.5 million sq. ft. in H1 2024, primarily due to the low base effect.

Sector Dominance:

Third-Party Logistics (3PL) companies led the absorption with a 39% share in H1 2024, up from 26% in H1 2023.

The engineering and manufacturing sector increased its share from 16% to 22%, while the automobiles and auto components sector saw growth from 4% to 9% over the same period.

Investment Surge:

The real estate sector attracted USD 1.6 billion in investments during H1 2024, representing 42% of total institutional investment.

Investments in H1 2024 were equivalent to one-third of the total institutional investments made over the past four years.

Compared to H1 2023, investments surged by 4.5 times, driven by the expansion of major global economies and increased foreign investor participation in India’s warehousing sector.

Government Influence:

Recent government initiatives aimed at boosting infrastructure development are expected to reduce logistics costs from 8-9% to 5-6% of GDP, potentially driving further growth in real estate activities within the warehousing sector.

Conclusion:

The warehousing and logistics sector's performance in H1 2024 underscores the growing demand for high-quality infrastructure and the critical role of strategic investments in driving this demand. With Mumbai and Pune leading the charge and substantial foreign investment flowing into the sector, the outlook for the second half of the year appears optimistic, provided that the necessary infrastructure continues to develop and logistical efficiencies improve.