India's Logistics Sector Flourishes in 2024 with Significant Rent Increases

India's logistics and industrial sector displayed strong growth in early 2024, marked by notable year-on-year rent increases. JLL's report highlights increased demand for high-grade properties and robust absorption rates, driven by sectors like 3PL and auto engineering, boosted by the National Logistics Policy.

India's logistics and industrial sector demonstrated robust growth during the first half of 2024, highlighted in a report from real estate firm JLL. Major cities such as Mumbai, Delhi NCR, Bengaluru, Kolkata, Chennai, Hyderabad, Ahmedabad, and Pune witnessed significant year-on-year rent increases for both Grade A and Grade B properties, rising by 4.8% and 6.4% respectively.

The JLL report attributed the rent surge to strong demand for warehousing and light manufacturing leases. According to the report, Grade A property vacancies stood at 6.6% in H1 2024, while Grade B properties had a 15.4% vacancy rate for the same period. The gross absorption across the top eight cities was approximately 24.2 million sq. ft., with Grade A properties making up 70% of this absorption.

With the total supply of industrial properties at 393 million sq ft and expectations to reach around 595 million sq ft by 2027, the sector's potential remains high. Organized Grade A warehousing supply stood at 204 million sq ft, surpassing the Grade B supply of 189 million sq ft, reflecting a strong preference for future-ready, efficient spaces. According to Yogesh Shevade, Head of Logistics & Industrial at JLL India, tenant preference is swaying towards Grade A spaces for warehouse efficiency, ESG compliance, and automation needs.

The report found that the third-party logistics (3PL) sector remains the largest demand driver, accounting for 38% of gross absorption, followed by the auto and engineering sector at 23%, and the FMCG, FMCD, and retail sectors at 20%. Key transactions spanned across logistics, e-commerce, auto and engineering, FMCG, FMCD, and retail sectors.

The main growth drivers of India's warehousing sector include the rise of quick commerce, the implementation of the National Logistics Policy, increased penetration of e-commerce into Tier I and Tier II/III cities, and the outsourcing of warehouse space to 3PL providers. Additionally, Grade A warehousing is gaining traction due to lower rents and higher efficiency per pallet position compared to Grade B properties.

The industry is also focusing more on Environmental, Social, and Governance (ESG) considerations, incorporating sustainability practices into construction and operations, according to the report.

(With inputs from agencies.)