Logistics sector in India has undergone a tremendous transformation in recent years. It is evolving from a traditionally unorganized and asset-heavy industry to a more streamlined and efficient operational model. There are several key factors driving this remarkable growth such as implementation of Good and Services Tax (GST), improved infrastructure, and increased adoption of automation technology.
These significant changes have not only enhanced the logistics efficiency but also led to much-needed restructuring of warehousing portfolios for smoother supply chain operations. Given the situation, the demand for bigger and Grade A warehouses tailored to meet the specific needs of logistics businesses has now surged more than ever.
Warehousing Dynamics in India
In 2023, India witnessed a 15% Year-on-Year (Y-o-Y) growth in total stock of Grade A & B warehousing space across the top cities. Among these cities, more than half of the warehousing stock was contributed by three major cities in India, including Delhi NCR, Mumbai, and Bengaluru. If the stats are taken into account, the warehousing sector has shown robust growth in the post-COVID era.
Last year, the industry witnessed a net demand of 40 mn sq.ft. with 70% of that demand observed in Grade A warehouse facilities. This proves to be a major shift in occupiers’ preference towards quality spaces due to adherence to additional safety norms and hygiene after the pandemic. As the demand for Grade A warehouses has been continuously increasing, a marginal dip is seen in the overall vacancy, reaching 15% in 2023 and is expected to touch 8% by 2027.
Having said that, let’s take a look at the overall performance of the Indian warehousing sector in top Tier 1 cities last year.
Warehousing Market Performance in Top 8 Tier 1 Cities in 2023
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How’s Govt. Playing Its Part?
Given the enormous potential of the logistics and warehousing industry, the Indian government has made efforts to support its expansion as its primary objective. A few of these noteworthy projects include the National Infrastructure Pipeline, PM Gati Shakti, state logistics policies, the National Logistics Policy, and dedicated freight corridors (DFCs).
The goals of these calculated initiatives are to embrace technology, boost the effectiveness of logistics, and encourage the establishment of standardized warehousing facilities. Government’s continuous efforts to strengthen the logistics and warehousing industry has resulted in substantial progress for our country.
Over the last eight years, India has climbed 16 places in the Logistics Performance Index (LPI), rising from 54th position in 2014 to 38th in 2023.
Future Outlook For Logistics & Warehousing
As the Indian economy has now recovered from the pandemic’s effect, the logistics and warehouse businesses across the country poised for remarkable growth fueled by changing consumer preferences, emergence of 3PL (third party logistics) companies and growing traction in the manufacturing sector. India’s warehouse stock is anticipated to grow at a CAGR of 12% over the next three years, surpassing 595 million square feet by 2027. Further, the Grade A stock is projected to increase at a 16% CAGR and reach 345 million square feet by 2027.
To sum up, with the implementation of the National Logistics Policy and government’s initiatives to improve infrastructure, India is in a strong position to grow its logistics and warehouse segment and promote sustainability and efficiency in the larger economy.
