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Warehousing leasing surges to 51 million sq ft in FY23: Report

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Mumbai and Delhi NCR led the market in terms of overall transaction volumes during the year with 9.5 million sq ft and 8.6 million sq ft respectively

Bengaluru: Warehousing leasing edged up to 51.32 million square feet across eight cities in FY (fiscal year) 2023 marginally higher by 0.1% YoY (year over year) according to India Warehousing Market Report 2023 by real estate consultancy Knight Frank.

“We have observed strong demand for warehousing along with great interest from the institutional and development side representing the suppliers of space and demand. Transaction volumes in FY 2023 have equaled the record-breaking levels achieved in FY22 while stock levels have exceeded 400 million sq. ft. this year,” said Shishir Baijal, managing director at Knight Frank.

Mumbai and Delhi NCR led the market in terms of overall transaction volumes during the year with 9.5 million sq. ft. and 8.6 million sq. ft. respectively. Bengaluru (7.4 million sq. ft.), Pune (7.4 million sq ft), Kolkata (5.1 million sq. ft.) and Hyderabad (5.1 million sq. ft.) also witnessed significant annual highs during FY23. 

Comparatively, Chennai and Ahmedabad recorded the least growth of 4.5 million sq ft and 3.8 million sq. ft. respectively. 

The retail sector spiked from 4%in FY21 to 11% in FY22 as retailers had to quickly add warehousing capacities to cater to the swift rise in demand. It sustained in FY23 with retail sector occupiers taking up 13% of the total space transacted.

While FY23 saw occupier demand sustain at the record levels seen in FY22, rents in most markets have maintained the upward trajectory set in the previous year, the report added. Except for Hyderabad seven primary markets witnessed 3-8% YoY during FY23.

“The Indian warehousing sector has experienced significant growth and transformation driven by factors such as the expansion of e-commerce, infrastructure development and regulatory reforms. The demand for modern warehousing facilities has surged due to the rise of organized retail and e-commerce,” said Sandeep Chanda, managing director of an international real estate developer, Panattoni.

Volume transacted by the e-commerce segment decreased by 71% YoY in FY23 since the offline market has been activated after the pandemic. However, with consumer behaviour increasingly inclined to transact on the Internet, e-commerce activity in the warehousing market is expected to regain traction in FY24.

According to the survey, third-party logistics (3PL) sector accounted for the highest market share among all occupier groups at 39% in FY23, the highest by any sector since FY17. 25% of the total warehousing space taken up by the 3PL sector in FY23 was located in Mumbai followed by NCR at 23%.

“Inventory management will become more efficient when artificial intelligence and machine learning are integrated,” said Rajesh Jaggi, vice chairman-real estate at Everstone Group, a real estate investment firm.

“We are optimistic that the warehousing business will continue to prosper in the upcoming years with the dedication to innovation, customer centricity, adaptability, new market penetration, adoption of automation and robotics and rising demand for logistics services,” added Jaggi.

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