Warehousing & Logistics Absorption Rises 8% In H1 2024, Mumbai, Pune Lead With 63% Share

In the first half of 2024, the warehousing and logistics sector in India saw an absorption of 16.6 million square feet, marking an 8 per cent increase over the same period in the previous year. However, this represented a 26 per cent decline compared to the second half of 2023, primarily due to a 74 per cent drop in absorption in the National Capital Region (NCR).

According to a report by Vestian, Mumbai and Pune accounted for 63 per cent of the total absorption in H1 2024, with Mumbai's share rising from 25 per cent in H1 2023 to 41 per cent in H1 2024. This growth was driven by increased demand for grade-A warehouses in areas such as Bhiwandi, Panvel, Uran, Taloja, and Ambernath. Conversely, NCR's share fell significantly from 31 per cent to 6 per cent during the same period. Southern cities, including Bengaluru, Chennai, and Hyderabad, contributed 29 per cent to the total absorption. Chennai's absorption surged by 191 per cent over H1 2023 due to a low base effect, totaling 1.5 million square feet.

The 3PL (Third Party Logistics) sector dominated with a 39 per cent share in H1 2024, up from 26 per cent in H1 2023. The shares of the Engineering & Manufacturing and Automobiles & Auto Components sectors also increased, from 16 per cent and 4 per cent in H1 2023 to 22 per cent and 9 per cent in H1 2024, respectively.

Investments in the sector reached USD 1.6 billion in H1 2024, accounting for 42 per cent of the total institutional investment in the real estate sector. This surge was driven by the expansion of major global economies and increased foreign investment in the Indian warehousing sector. Investment levels in H1 2024 were equivalent to one-third of the total institutional investment received over the past four years, with a 4.5-fold increase compared to H1 2023.

Shrinivas Rao, FRICS, CEO of Vestian, commented on the easing availability of funds due to increased participation by foreign investors. He highlighted that recent government infrastructure initiatives are expected to reduce logistics costs from 8-9 per cent to 5-6 per cent of GDP, thereby boosting real estate activities in the warehousing sector.

Key Investment Deals in H1 2024:
Reliance Retail Ventures: A USD 1.5 billion investment by KKR and Abu Dhabi Investment Authority (ADIA) in warehousing assets, accounting for 96 per cent of total sector investments.
CapitaLand India Trust (CLINT): Entered a forward purchase agreement with Casa Grande Group to acquire three industrial facilities at OneHub Chennai, with a total leasable area of 0.79 million square feet and a deal valued at approximately USD 32.3 million.

Goa Investment Promotion and Facilitation Board (Goa-IPB): Signed an MoU with TVS Industrial and Logistical Parks (TVS ILP) to develop a grade-A warehousing and logistics park in Verna Industrial Estate, with an investment of USD 15.6 million.

Weighted average rentals in H1 2024 declined by 3 per cent to Rs 21.6 per square foot per month compared to the same period last year. Bengaluru saw the highest rental decline at 8 per cent, followed by Hyderabad at 7 per cent. Conversely, Pune experienced a significant rental increase of 30 per cent, reaching Rs 27.1 per square foot per month, followed by Chennai with a 22 per cent increase compared to H1 2023.