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India Logistics Warehousing Real Estate Overview
- Logistics and warehousing are essential for moving goods across the nation. Probably the first thing that comes to mind when someone thinks of a warehouse is an airless, moist, and humid space. a location used for temporary storage of goods. A warehouse is an essential component of the infrastructure of any business and a major facilitator of the global supply chain. It serves as the pivot for the production, distribution, and procurement services that together create strong economies.
- Since there aren’t many organised players in the warehousing sector of India’s logistics and warehousing , there are very few opportunities to purchase assets from them. India Logistics Warehousing is primarily unorganised. Nonetheless, warehousing assets can be constructed more quickly than other real estate assets.
Overview about Warehousing
- Simply put, warehousing is the process of organising and keeping products in a specific area. This industry is essential to India’s smooth supply chains, which guarantees that goods are delivered to customers quickly.
- The impact of warehousing on various industries, including manufacturing and e-commerce, makes it impossible to overstate its importance.
- The warehousing asset-class is a long-term asset class. Nonetheless, warehousing assets can be built more quickly than other real estate assets.
Current Scenario of Warehousing in India
- India’s logistics and warehousing industry saw a notable rise in transaction volumes in 2023, along with a decline in vacancy rates and a move towards third-party logistics providers (3PL). India Logistics Warehousing is projected to grow at a CAGR of 10.49% from 2022 to 2028, reaching INR 2,271 billion as per the comprehensive Knight Frank Report.
- The Indian warehousing and logistics sector is expected to experience significant growth in 2024, building on these achievements and several other factors, such as supportive policy structures, technological advancements, and a focus on sustainability.
- According to the Knight Frank report, warehouse development projects’ Equity IRRs show how warehouses are developing into increasingly profitable asset classes within the field of commercial real estate development.
Growth Trends of Warehousing
In recent times, India’s logistics and warehousing has experienced rapid expansion. The demand for advanced storage solutions has increased due to the growth of e-commerce and increased manufacturing activities. There are many local and foreign companies in the market competing for a share of the logistics market.
The CBRE report indicates that there was an 8 percent increase in leasing activity in major Indian cities in 2023 due to an unprecedented surge in demand for industrial and logistics spaces.
What will be the Global size of the Warehousing And Storage Market During the Forecast Period?
Source: Technavio
Key trends to look out for in the India’s logistics and warehousing
Automation and Technology Integration
In the 3PL and warehousing industries, there will likely be a major uptick in the use of technology by 2024. Artificial intelligence, data analytics, and automation will be used to boost overall efficiency, increase accuracy, and optimise supply chain operations. This technology innovation will help cut down on errors, speed up turnaround times, and eventually save operating expenses in Indian Logistics Warehousing.
Growth into Markets at Tiers Two and Three
Hubs for warehousing and logistics have historically been centered in large cities. Strategic tier 2 and tier 3 storage solutions will be essential in 2024 due to the growing demand for quick deliveries brought on by the growth of manufacturing and e-commerce.
The need to decentralise distribution networks, shorten transit times, and capitalise on the expanding consumer markets in non-metropolitan cities, in addition to the availability of affordable labor and rental opportunities, are the main drivers of expansion to strategic, non-urban locations. This growth advances accessibility to a wider range of clients and bolsters the general economic progress of these areas.
Growth in Class A Warehouses
India’s logistics and warehousing environment is expected to significantly change in 2024, with a shift towards Grade A warehouses. These facilities provide cutting-edge technology, excellent safety precautions, and modern facilities, all in accordance with international standards.
The increasing need for greater efficiency, more storage capacity, and adherence to international supply chain standards drives up demand for Grade A warehouses. Grade A warehouses will be essential to fulfilling the changing demands of both domestic and foreign businesses as India positions itself as a global hub for logistics.
Choosing Sustainable Activities
An increasingly important component of warehousing and logistics is sustainability. We anticipate a stronger focus on eco-friendly business practices in 2024, such as using green technologies, energy-efficient warehouses, and eco-friendly packaging. EVs have also steadily become the preferred vehicle for short-distance delivery, contributing to the creation of carbon-neutral deliveries.
Environmentally friendly practices will not only meet international standards but also establish India as a conscientious and progressive logistics hub as global supply chains change.
Factors Influencing Warehousing Space Demand
- Made in India: To position India as a global hub for manufacturing, design, and manufacturing, as well as increase the manufacturing sector’s GDP share to 25% by 2025, the warehousing market is attracting increased attention due to its excellent investment potential.
- High Inventory: It is anticipated that during the FY 2021–2026 period, warehousing transaction volumes for the eight primary markets (NCR, Ahmedabad, Mumbai, Pune, Hyderabad, Bengaluru, Chennai, and Kolkata) will increase at a compound growth rate of 19%.
- In-city Warehousing: Multi-story warehouses may soon become prevalent due to the pressing need to reduce delivery times, the e-commerce industry’s explosive growth, and the entry of well-known companies like the Tatas and Reliance Group. These contemporary, multi-story buildings will service urban catchment areas with high population densities.
Warehouses: A safe commercial real estate investment
Without a doubt, one of the greatest investment options if you’re looking for low risk, steady growth, and long terms is commercial real estate. You should have a decent amount of variation in your commercial real estate (CRE) portfolio by including one or two warehouses.
Unless warehouses are specifically built for a specific tenant, they are usually only considered for shorter terms when making investments. If the latter is the case, your warehouse investment will outperform an office space investment, if not exceed it.
Costs of building a warehouse are significantly lower. Because of this, warehousing is a far more affordable option for commercial real estate. It also takes less time to construct—just six months as opposed to three years—than an office block! Because of their quicker monetization cycle from the time of construction to rental earnings, they are the best investments for those seeking long-term security without compromising on performance.
Also, For those looking for long-term security without compromising performance, they are good investments because the monetization cycle from construction to rental earnings is significantly shorter.
Future Outlook
The emergence of all of these developments in 2024 will not only mirror the shifting dynamics of the global supply chain but will also establish India as a competitive force in the global logistics arena as the 3PL and India Logistics Warehousing sector will develop. 2024 will see the fast-track implementation of several important initiatives outlined in the National Logistic Policy 2020, in line with the PM’s vision of India emerging as a major player in the global supply chain.
Bottom Line
Experts forecast steady growth in India’s logistics and warehousing, fueled by the expansion of manufacturing and e-commerce. It is anticipated that the emergence of omnichannel retail will also impact warehouse management and design. Large warehouse spaces are currently in short supply compared to demand, so demand is expected to rise steadily as occupiers move out of their smaller warehouses and consolidate their operations in larger facilities.
According to a report by consulting firm PwC, India’s logistics and warehousing market has a high potential for growth over the next few years and is currently predicted to grow at a rate of 35 to 40 percent annually.
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