India’s Logistics & Industrial Sector: 2022 & Beyond

India’s Logistics & Industrial sector has hit the ground running in 2022 after being resilient during the pandemic. Uplifted by the 3PL and consumption-based sectors and the expansion of the Indian manufacturing market, the logistics & industrial segment emerged as one of the most attractive investment propositions for institutional investors in 2022.

The sector has gained significant momentum in 2022 and has hit an all-time high net absorption of 41 mn sq ft across the top 8 cities of India. Interestingly, more than 68% of this net demand has been observed in Grade A space showing a shift in tenants’ preference towards quality spaces with high operational and cost efficiency.

In 2022, the warehousing stock in the top eight cities of India has reached ~330 mn sq ft and is projected to cross 470 mn sq ft by 2025. Major global funds have invested with warehousing developers and operators to expand their reach and regional footprint, being the key differentiator in the sector. This has increased the good quality supply in the market, with Grade A taking centre stage, contributing 161 mn sq ft of stock in 2022.

2022 has witnessed substantial upward rent corrections after being stable for the last three years. The average Grade A and Grade B rents increased at 9% and 7% y-o-y growth rates, respectively, in 2022, the highest in the last five years. This growth is driven by the increasing demand for technically specialised facilities from 3PL, Ecommerce, Retail, and specialised manufacturing sectors. As top international and domestic occupiers favour Grade A spaces, the rent growth of Grade A is higher than Grade B.

Some prominent trends are defining the growth of India’s Logistics & Industrial sector include:

• Easy entry routes for non-polluting manufacturing companies through built manufacturing leasing
  
  
• Push for technology adoption with investments in technology now considered as 'good cost'
  
  
• ESG/ sustainability intervention is a key constituent in developing warehouses and is getting assimilated with the investor and developer ambitions
  
  
• Government initiatives such as National Logistics Policy, PM Gati Shakti, and Production-Linked Incentives (PLI) Schemes are acting as the movers and shakers of the sector