H1’24 Warehousing & Logistics Absorption up 8% YoY, Mumbai, Pune Dominate: Vestian

New Delhi, August 1, 2024:  H1 2024 witnessed an absorption of 16.6 Mn sq ft, showcasing an increase of 8% over the same period a year earlier. However, it reduced by 26% when compared to H2 2023. The reduction could be attributed to a significant dip of 74% in NCR’s absorption.

Mumbai and Pune together accounted for 63% of the total absorption in H1 2024, followed by southern cities (Bengaluru, Chennai and Hyderabad) at 29%. Mumbai’s share saw an increase from 25% in H1 2023 to 41% in H1 2024, the growth can be attributed to an increase in demand for grade-A warehouses in areas such as Bhiwandi, Panvel, Uran, Taloja, and Ambernath. NCR witnessed a significant decline in its share from 31% to 6% in the same period. Furthermore, Chennai reported absorption of 1.5 Mn sq ft in H1 2024, registering an increase of 191% over H1 2023 due to the low base effect.

City-wise Absorption 

Source: Vestian Research

3PL (3^rd Party Logistics) companies dominated absorption with 39% share in H1 2024. The share has increased from 26% in H1 2023. Similarly, the share of Engineering & Manufacturing and Automobiles & Auto Components sectors also saw an increase from 16% and 4% in H1 2023 to 22% and 9% in H1 2024, respectively.

Sector-wise Absorption (% share of total)

Source: Vestian Research

The sector received investments worth USD 1.6 Bn in H1 2024, accounting for 42% of the total institutional investment received in the real estate sector. As major economies of the world started expanding again and the participation of foreign investors increased in the Indian warehousing sector, investments in H1 2024 were equal to 1/3^rd of the total institutional investment received in the past four years. Moreover, investments increased by 4.5X in H1 2024 compared to H1 2023.

Shrinivas Rao, FRICS, CEO, Vestian said, “As participation of foreign investors increased, availability of funds eased in the sector. Moreover, recent government announcements to boost infrastructure developments is likely to reduce logistics costs from 8-9% to 5-6% of the GDP, which in turn will lead to an increase in real estate activities in the warehousing sector.”

Institutional Investments

Source: Vestian Research

Key Investment Deals (H1 2024)

• USD 1.5 Bn investment in Reliance Retail Ventures warehousing assets by KKR and Abu Dhabi Investment Authority (ADIA) was the largest deal concluded by value in H1 2024, accounting for 96% of the total investments in the sector

• CapitaLand India Trust (CLINT) has entered into a forward purchase agreement with Casa Grande Group to acquire three industrial facilities at OneHub Chennai, with a total net leasable area of 0.79 Mn sq ft. The deal is valued at approximately USD 32.3 Mn. This investment is expected to be executed in three phases, with the completion of Phase 1 by the first half of 2025.

• Goa Investment Promotion and Facilitation Board (Goa-IPB) signed a Memorandum of Understanding (MoU) with TVS Industrial and Logistical Parks (TVS ILP). This agreement is expected to facilitate the development of a grade-A warehousing and logistics park in Verna Industrial Estate with an investment of USD 15.6 Mn.

Weighted average rentals marginally declined by 3% to INR 21.6/sq ft/month in H1 2024 over the same period a year ago. Rentals in Bengaluru declined the highest by 8% whereas Hyderabad witnessed a decrease of 7% during the same period stated above. On the other hand, rentals saw a significant increase of 30% to INR 27.1/sq ft/month in Pune, followed by Chennai with 22% uptick in rentals during H1 2024 compared to H1 2023.

City-wise Weighted Average Rentals

Source: Vestian Research