Modern Warehouses have evolved into automated and tech-driven dynamic hubs playing a pivotal role in the business landscape. The rise in e-commerce, growing consumer aspirations, and favourable government policies have been key factors behind one of the fastest-growing spaces in today’s real estate market. According to a report by MarketResearch.com, India’s warehousing market is expected to reach INR 2,872.10 billion by 2027, with a CAGR of 15.64% during 2022-2027. Furthermore, industrial and logistics sector witnessed an absorption of 13.5 MSFT in Q1 2024 compared to 11 MSFT in Q1 2023, displaying a 22.7% Y-o-Y growth, as per a Savills report.

Warehousing: A Lucrative Investment Asset

Increased Private Equity Investment: Warehousing investments are on the rise; the sector has attracted substantial interest from global entities and High-Net-Worth Individuals (HNIs). As per a Knight Frank report, approximately 77% of private equity (PE) players expressed positive sentiments about continued participation in creating new warehousing assets in India. The year 2023 witnessed a noteworthy surge in private equity investment for warehousing, reaching $1.9 billion, a momentum that is expected to extend in the coming year.

Focus on Grade A Warehousing: HNIs also recognise the potential for lucrative returns and view Grade A warehouses as a good investment opportunity especially due to the country’s thriving e-commerce, 3PL and industrial markets and escalating demand for modern world-class solutions.

The warehousing sector, recognised as one of the fastest-growing sectors, reflects the benefits of owning commercial real estate. It also offers a steady income flow, integrates cutting-edge technologies, and improves operational efficiency.

Demand Drivers for India’s Grade A Warehousing

E-commerce Growth: The e-commerce sector remains a major force behind the rising demand for Grade A warehouses. As online shopping continues to soar, companies need sophisticated warehousing solutions to manage inventory efficiently, process orders quickly, and ensure fast delivery to customers. Grade A e-commerce warehousing solutions provide the advanced infrastructure and technology necessary to meet these needs, including high ceilings, large floor plates, robust IT systems, and automation capabilities.

Manufacturing and Supply Chain Support: The manufacturing sector, whose demand is spurred by the decentralisation from China and initiatives like ‘Make in India’ and Production Linked Incentive (PLI) scheme. Within this sector, industries such as automotive, energy, and chemicals are at the forefront. Grade A warehouses for industrial operations offer the infrastructure needed to store raw materials, components, and finished products efficiently, supporting just-in-time production and distribution strategies that enhance overall supply chain efficiency of manufacturing companies.

3PL Expansion: Accounting for about 30% of the Grade A warehousing transaction volume is the 3PL sector. Modern warehouses, with their state-of-the-art facilities for facilitating multi-level racking, automation and mechanization, and strategic locations, enable 3PL companies to meet their clients’ complex logistics needs, increase precision, and reduce inventory inward and outward times.

Growth of FMCG and retail sectors: Equally significant contributors are the FMCG and retail sectors. The growth of organised retail, SKU (Stock Keeping Unit) expansion, and evolving consumption patterns necessitate efficient storage and distribution systems, which Grade A warehouses offer. They also facilitate the necessary infrastructure to handle high volumes of goods, maintain product quality, and ensure quick replenishment of retail outlets.

Policy Push for Warehousing in India

Government Initiatives: Key initiatives such as the GST, the National Logistics Policy, and the National Infrastructure Pipeline have streamlined logistics operations, reducing complexities and inefficiencies. The PM Gati Shakti program further enhances the warehousing sector’s appeal by focusing on multimodal connectivity—which is crucial in reducing logistics costs and time, making warehousing investments even more attractive. Adding impetus is the infrastructure status granted to the logistics sector, which has significantly boosted investor confidence—a status which provides easier access to institutional funding and other financial benefits including securing investments.

Private Investor Participation: These progressive policies have not gone unnoticed by global and domestic investors. Significant players such as Ascendas, Blackstone, Everstone, ESR, LOGOS, and Mapletree have invested heavily in the development of modern, state-of-the-art Grade A warehousing and logistics parks in India across strategic locations. Blackstone currently has 24 parks in 10 markets with a collective development potential of 42 million square feet across all its holdings. A presence like this not only infuses capital but also introduces best practices and advanced technologies, further modernising India’s Grade A warehouse landscape.

Future Outlook for Grade A Warehousing and Logistics Parks in India

The future of the warehousing sector in India looks nothing but promising. The total warehouse space is expected to grow by a CAGR of 12% each year, reaching 595 million square feet by 2027. Grade A warehouses are predicted to grow even faster, at a CAGR of 16% each year, reaching 345 million square feet by 2027.

With occupiers increasingly preferring superior-quality spaces, vacancy rates are likely to decline, and rental prices are set to rise—another sign towards the sector’s potential for steady income and attractive returns on warehousing investments.

As India continues to modernise and expand its infrastructure, the warehousing sector is poised to play a crucial role in the country’s economic growth. It is bereft with opportunities for investors and businesses alike that one only has to grab on.