Demand for warehousing has been flat in the financial year 2022-23 with top eight markets — including the four metros — reaching 51.3 million sq ft. This was a 0.1 per cent increase over the previous fiscal, according to Knight Frank India’s report titled ‘India Warehousing Market Report – 2023’. The report assessed leasing of warehouses across eight primary markets and 17 other secondary markets in the country.
While Mumbai and NCR led the market in terms of overall transaction volumes during FY23, Bengaluru and Kolkata witnessed the highest percentage growth in annual transacted volumes at 25 per cent and 18 per cent y-o-y respectively. However, Chennai, Ahmedabad, Hyderabad and Pune saw a decline in volume.
The surge in activity from third-party logistics (3PL), manufacturing and retail sectors has contributed to the increased demand for warehousing. Compared to the previous year, the 3PL sector led the pack with a 34 per cent y-o-y growth.
The manufacturing sector also experienced a significant rise in demand, with a 23 per cent y-o-y growth. However, the e-commerce sector recorded a decline in demand in FY23, primarily due to early capacity building in recent years and a gradual shift towards flexibility.
The volume transacted by the e-commerce sector saw a 71 per cent y-o-y decline in FY23 due to excess capacity built during the pandemic years for meeting the surge in consumption. This decline in demand is expected to be temporary, as the sector’s activity is likely to revive once the excess capacities are exhausted in the upcoming year.
With normalcy restored to mobility post-pandemic, consumer demand has rebounded in the hard format stores. This had a direct bearing on the warehousing space take-up of the retail sector. The sector’s share spiked from 4 per cent in FY21 to 11 per cent in FY22 as retailers had to quickly add warehousing capacities to cater to the swift rise in demand. This increase in demand has sustained in FY23 as well with retail sector occupiers taking up 13 per cent of the total space transacted, attaining a new high for the sector, the report said.
The manufacturing sector, including automobile and engineering industries, has witnessed a significant growth in its market share of total transactions since the pandemic subsided, rising from 23 per cent in FY21 to 30 per cent in FY23. Among all the occupier groups, the 3PL sector held the highest market share at 39 per cent in FY23 — the highest share recorded by any sector since FY17.
Shishir Baijal, Chairman and Managing Director, Knight Frank India said, “The warehousing market has experienced consistent growth, with transaction volumes exceeding the previous year’s figures, which were already the highest in history. This growth is not limited to the top eight markets but has also extended to secondary markets, supported by enhanced infrastructure such as highway networks, rail systems, and air transportation. Indeed, there has been a noticeable shift in the occupier groups within the warehousing market.”