India’s Grade A warehousing sector will cross 300 million square feet by 2025.

According to a report jointly prepared by CREDAI and CRE, thanks to the rapid growth of the industry and the emergence of one of the fastest-growing real estate segments in the country, the Indian warehousing sector will cross the 300 million square feet (MSF) mark by 2025 Matrix.

Currently, total Class A storage resources are 216.2 MSF. India saw a 5% rental growth in the first quarter of 2024, reflecting that demand for industrial space in India continues to outpace supply, with an absorption-to-supply ratio of 1.4 in the quarter.

The nationwide study noted that Pune and NCR contributed 45% to the pan-India demand for A/A+ warehousing services, while MMR and NCR combined contributed 53% in this segment. Compared to Q1 CY’23, MMR alone had a 52% increase in supply in Q1’24.

The various industries that were most influential in achieving this growth were 3PL – third-party logistics (27%), manufacturing (20%), and e-commerce (12%). This quarter also saw a 1.2% decline in the class A/A+ vacancy rate in the warehouse industry in the 6 largest cities compared to the first quarter of 2023.

Various data points selected in this report indicate that over the last decade, India has changed its approach to the warehousing sector, moving from an unorganized storage structure to a significant asset class. Given its high growth potential, better inflation prospects, government emphasis on policy implementation, lower production costs and availability of cheap labor compared to developed countries, India is an attractive investment destination.

Sharing the findings of the report, Boman Irani, CEO, CREDAI, said, “The strong fundamentals of the Indian real estate sector reflect India’s economic growth, as evidenced by the exponential growth of specialized segments such as warehousing. 5% rent growth in the first quarter of CY ’24 underscores the surge in demand in this emerging asset class. With e-commerce, retail expansion and the entry of global companies into India, we anticipate a strong increase in demand and supply for A-grade warehouses. Pune, NCR and MMR are leading this transformation, and India’s favorable policies, competitive production costs and ample labor force make that it is a major investment destination.”

Storage as an asset class is the preferred sector for many investors and developers alike to balance their real estate portfolio because it is faster to produce and generates higher revenues with lower risk. Therefore, the demand for warehouses is expected to continue to grow in the future due to the increasing demand resulting from increased consumption. The government’s continued policy support over the last few years, including the state of infrastructure in the logistics sector, implementation of GST and allowing 100% FDI in warehousing and warehousing, has also been crucial in attracting investment in this sector.