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Shrinivas Rao, FRICS, CEO, Vestian, The Indian warehousing and logistics sector is sailing through global headwinds on the back of strong and sustainable fundamentals. Several mega infrastructure projects are planned across the country to improve connectivity and reduce transit time.聺

NCR commanded the highest share at 31 per cent of the total absorption during H1 2023, which increased from 21 per cent a year earlier. This indicates a robust demand for warehousing and logistics facilities in and around Delhi, Noida, and Gurugram which are prominent commercial and industrial hubs. Western cities of India, Mumbai, and Pune, accounted for 42 per cent of the total absorption during H1 2023, increasing from 35 per cent in H1 2022. This could be attributed to the higher demand for warehousing facilities in these cities.

The micro-markets of Bengaluru and Hyderabad witnessed a drop in demand for warehousing facilities due to the limited supply of Grade A warehouses in the regions during the analysis period.

Micro-markets of NCR quoted the highest weighted average rentals of Rs 22.5/sq ft/month, complementing the region's highest absorption amid strong demand and a competitive market. Therefore, the weighted average rentals increased by 4 per cent within a year. Bengaluru closely followed the NCR market with Rs 22.0/sq ft/month, showcasing the citys prominence in the logistics sector.

3PL companies continued to be the major demand driver in H1 2023 with 26 per cent of the total share. Engineering and manufacturing and FMCG companies accounted for 16 per cent and 11 per cent shares respectively.

Despite sustained leasing activities during H1 2023, institutional investments were reduced by 69 per cent over H1 2022, as we saw investors opt for wait-and-watch mode amid global uncertainty. However, the trend for overall institutional investments remains the same.

Rao further stated, Vertical stacking and in-city warehousing are gaining prominence to improve efficiency and reduce cost. There is a focus on ESG factors within the sector which again is in alignment with clients environmental and social objectives and goals.聺

The emergence of tier-2 cities as warehousing hubs and extensive use of AI and ML technologies to improve efficiency may shape the future of the warehousing and logistics sector in India. Additionally, the Make in India campaign and China plus One strategy coupled with upcoming mega infrastructure projects may provide impetus to the Indian manufacturing industry, leading to an increase in demand for warehouses.