India will require funding worth $3.8 billion to meet the demand for around 223 million sq. ft of Grade A warehousing properties over the next three years, as per a CREDAI-Anarock report titled ‘India Warehousing – A Sunrise Sector’.
According to Shobhit Agarwal, MD and CEO, Anarock Capital, the warehousing sector currently has ‘dry powder’ funding of $900 million from existing commitments. This indicates a latent investment opportunity of further $2.8 billion in the warehousing sector in the near future. Much of this funding will have to target Grade A warehousing facilities, which is seeing growing demand owing to its direct and indirect beneficial impacts on overall operational efficiencies.
Not just in metro cities, the demand for warehousing is seeing a rapid rise in tier-2 and tier-3 cities in India, as per the report. The absorption of Grade A warehousing rose from 34 million sq ft in 2018 to 48.5 million sq. ft in 2021 at a CAGR of 12.6%, the report said. Meanwhile, the supply in this category increased from 37.8 million sq ft to 51 million sq ft at a CAGR of 10.6% during the same period.
Warehousing demand will grow in future owing to a rise in demand resulting from increased consumption. Policy support from the government in recent years, including infrastructure status to the logistics sector, implementation of GST, and allowing 100% FDI in warehousing and storage, has attracted investments in this sector, mentioned Agarwal.
According to the report, third-party logistics (3PL), e-commerce, manufacturing and automotive sectors account for 78% share of warehouse leasing space across the top seven cities. 3PL has the highest leasing space at 42%, followed by e-commerce and manufacturing and automotive at 18% each.
In terms of warehousing rentals, Mumbai Metropolitan Region (MMR) has the highest average rent at Rs 27 per sq. ft, and Hyderabad has the lowest at Rs 20 per sq. ft. The western micro markets of Bhiwandi, Chakan and Panvel/Taloja dominate Grade A warehousing space leasing share with 41%.