Latest Update: How Has the Logistics and Warehousing Sector Fared in H1 2024?
Shopping for items, from daily essentials and clothing to gadgets and appliances, has become an online affair in a post-pandemic world. With the growing popularity of e-commerce, the logistics and warehousing sector has become one of the most crucial components of supply chains across the country. As the manufacturing sector has flourished over the last few years, industry players are keen to see how the logistics and warehousing sector performed in the first half of 2024. Here is a quick update on key happenings in the sector that took place in the first half of the year.
Update on the Logistics and Warehousing Sector in H1 2024
India’s warehousing sector witnessed healthy trends in the first half of 2024, even as volumes remained flat, according to a Knight Frank report.
The report by the real estate consultant, which also tracks the warehousing sector, said transaction volumes for leasable warehouses fell 4% dip year-on-year to 2.13 million square feet in H1 2024. The consolidation was led by slackening demand from the e-commerce sector.
“Since early 2022, the e-commerce sector volumes have remained stagnant due to surplus capacities created with the aggressive expansion during the pandemic,” the report said, adding that additionally, major players in the sector have acquired large-format, captive-owned spaces for their regional hubs, which are not reflected in market demand as they are not part of the leasable space market.
“With a growing emphasis on profitability, e-commerce companies have focused on reducing costs and avoiding speculative expansion,” the report added.
Industry-wise Trends
The fall in demand from e-commerce sector was largely offset by rising demand from the manufacturing sector, signifying “a more resilient and broad-based occupier base which did not have to rely on a specific tenant group to drive volumes in the warehousing market.”
According to the report, the volume transacted by the manufacturing sector continued to exceed that of the third-party logistics (3PL) sector and last-mile logistics in H1 2024 constituting 36% of the total volume transacted during the period.
Companies in the manufacturing sector such as those in the automotive, energy, and chemicals industries, accounted for this significant percentage of transaction volume during the period.
It further said that 23% of the total space transacted in H1 2024 was for industrial use compared to 17% previously, further signifying the increasing impact of the manufacturing sector on the warehousing landscape.
The report[1] attributed the rise in the share of manufacturing sector to the shifting away of manufacturing by global giants away from China and the Indian government’s initiatives such as production-linked incentive (PLI) scheme and the ‘Make in India.’
City-wise Performance
Knight Frank’s report[1] listed city-wise performance in the warehousing sector as follows:
- Mumbai took the lead, accounting for 20% of the total transaction volumes.
- NCR was up next, making up for 17% of the total transaction volumes.
- Ahmedabad and Kolkata showed the most growth, boasting year-on-year increases of 17% and 27% respectively, mostly due to robust manufacturing and FMCG sectors.
- Vacancy levels across major cities like Mumbai, Pune, and Ahmedabad fell to single digits at 9.4%, 8%, and 8.3%, respectively.
Private Equity Investments
The Knight Frank report[1] also shed light on the state of private equity investments in the warehousing sector. According to the report, investments in the warehousing sector increased to USD 1.5 billion in H1 of 2024 when compared to USD 0.55 billion in H1 2023 - a 176% year-on-year surge.
“PE investors remain actively engaged in the warehousing market, particularly targeting subsectors such as 3PL and e-commerce facilities that are expected to have a robust growth trajectory,” it said. “This can be attributed to the bright economic outlook with the vast consumer market having become a battleground for businesses constantly striving to shorten supply chains for the increasingly demanding customer.”
Outlook
The report has a positive outlook for the future of warehousing in India. The report states that the government's increasing focus on the manufacturing sector has allowed the country's logistics & warehouse sector to grow.
Additionally, the steady presence of 3PL players has kept overall market volume high even when the e-commerce sector has seen demand fall. India's robust business landscape & supply chain diversified warehousing demand, and growing institutional interest will help the market find momentum in the near to medium term.
The report also states that while the development of Grade-A warehousing facilities has increased in the last few years, larger markets like Mumbai and NCR have fewer units.
At Lodha, we've always believed in staying ahead of the curve and anticipating the needs of our clientele ahead of time. To serve the ever-expanding warehousing and logistics sector and meet the demands of e-commerce businesses & last-mile logistics, catering to cities like Mumbai and nearby regions of Bhiwandi & Palava, we have set up in-city logistics park in Kurla and industrial & logistics park at Palava. Lodha Logistics and Industrial Park offer state-of-the-art warehousing facilities & warehouse management spread over a sprawling area of more than 800 acres (planned).
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Ensure you harness the power of quality warehousing and logistic facilities by investing in Lodha Logistics and Industrial Park Palava and LLP Kurla to reach new heights.