India’s logistics sector grows 5% in H1 2024

India’s logistics and industrial sector saw strong growth in H1 2024, with significant rent increases in major cities due to high demand for warehousing and light manufacturing. Grade A properties are favored for their efficiency, contributing 70% of gross absorption. The sector’s expansion is driven by the rise of e-commerce, quick commerce, and 3PL demand, alongside a growing focus on ESG practices.

Source Freepik

India’s logistics and industrial sector has shown impressive growth in the first half of 2024, demonstrating its resilience and importance in the market, according to a report by real estate firm JLL.

In major cities like Mumbai, Delhi NCR, Bengaluru, Kolkata, Chennai, Hyderabad, Ahmedabad, and Pune, rents for both Grade A and Grade B properties increased significantly year-on-year by 4.8% and 6.4%, respectively, due to strong demand for warehousing and light manufacturing leases, as highlighted in the report.

Grade A properties had a vacancy rate of 6.6% in H1 2024, while Grade B properties had a vacancy rate of 15.4%. Gross absorption across the top eight cities amounted to around 24.2 million sq. ft., with Grade A properties contributing 70% and Grade B properties contributing 30%. The total supply of industrial properties has reached 393 million sq. ft., with expectations to grow to approximately 595 million sq. ft. by 2027, reflecting the sector’s strong potential.

“Organized Grade A warehousing supply stood at 204 million sq. ft. surpassing the Grade B supply of 189 million sq. ft thus indicating a strong preference of tenants to go for future-ready spaces that can increase warehouse efficiency, ESG compliance and automation needs,” said Yogesh Shevade, Head, Logistics & Industrial, India, JLL.

According to the report, the third-party logistics (3PL) sector remained the largest demand driver, accounting for 38% of gross absorption, followed by the auto and engineering sector at 23%, with the FMCG, FMCD, and retail sectors contributing 20%.

Key transactions spanned sectors such as logistics, e-commerce, auto and engineering, FMCG, FMCD, and retail. The warehousing sector’s growth drivers include the rise of quick commerce, the National Logistics Policy, increased e-commerce penetration into Tier I and II/III cities, and the outsourcing of warehouse space to 3PL.

The report also noted that Grade A warehousing is becoming more attractive due to lower rents and higher efficiency per pallet positions compared to Grade B properties. The industry is placing more emphasis on ESG (Environmental, Social, and Governance) considerations, with sustainability practices being integrated into construction and operations.