Demand for Warehousing Shows Resilience with Growth in Lease Rentals

Demand for Warehousing Shows Resilience with Growth in Lease Rentals

The demand for warehousing has shown resilience marked with growth in lease rentals for logistic spaces across top eight markets during the half year ended September. While occupier traction seems to have taken a pause in the current analysis period, rent growth across markets has been relatively healthy during the period since March.

Pune and Chennai at 4% and Ahmedabad with a 3% growth in six months were markets with the most growth, showed a Knight Frank India study. Total 23 million sq ft space transacted in the first half ending September across the top eight markets represents a 10% on-year drop in volume. Around 53% of these transactions were for Grade A assets.

Transaction activity was well distributed across markets. Pune, the leading market, accounted for 19% of the total warehousing volume, driven primarily by the automotive industry. Mumbai was the second most prolific market, representing 16% of the total warehousing area transacted during the period, with the third-party logistics (3PL) sector as a significant contributor.

“As the 3PL sector playing a pivotal role in the market and the manufacturing sector exhibiting substantial growth over the past two years, the overall demand from occupiers has remained remarkably resilient, even considering the e-commerce sector’s cautious approach during this period,” said Shishir Baijal, CMD, Knight Frank India.

According to him, while the global economic and geopolitical landscape is expected to exert some influence on the Indian market, it is noteworthy that the nation’s relatively robust fiscal position and resilient economy are well poised to support the stability and growth potential of the warehousing market in the remainder of fiscal year 2024.

Pune is the most expensive warehousing rental market in the country, amongst the reviewed eight cities, with average rents for grade A warehouses at Rs 25.9 per sq ft a month. Followed by Kolkata with monthly rentals of Rs 23.6 per sq ft and Mumbai at Rs 23.4 per sq ft a month.

Continuing their strong showing in the financial year 2022-23, the volume transacted by the manufacturing sector companies exceeded that of the 3PL sector in the first half of 2023-24. Manufacturing sector companies from the automotive, energy and chemicals space constituted a substantial 47% of the total transacted volume during the period.

India has benefited from the sustained move towards decentralisation of manufacturing capacity from China, with global manufacturing giants such as Apple, Samsung, Foxconn and TSMC increasing their manufacturing base in the country.

The companies from the 3PL sector comprised 30% of the volume while other sectors had single digit shares.

E-commerce sector volumes had languished since the beginning of 2022 as aggressive expansion during the pandemic created excess capacities that are still being utilized. With the focus increasingly shifting toward profitability, e-commerce companies have concentrated on curbing costs as well as speculative expansion.

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

TIS Staff

wp_ghjkasd_staff

Leave a Reply

Your email address will not be published. Required fields are marked *