The Indian warehousing and logistics sector has, in recent times, been undergoing a transformation. As the Indian economy has expanded, this sector has assumed a pivotal role with improving road infrastructure[1] aiding cost efficiency and competitiveness. Incidentally, traditional “godowns”[2] are evolving rapidly with the use of warehouse management systems[3] (WMS).

There has been a surge in the growth of new Grade A and B warehousing space in the top eight cities of India. By end-2015, total warehouse space will reach 97 million sq ft, about one-fifth the size of the Grade A office stock of the top seven Indian cities, and recording a remarkable 21% compound annual growth rate (CAGR) from 2010-15. The highest contributors to this stock will be the Mumbai metropolitan region and Delhi NCR with 23.2 and 22.7 million sq ft of space, respectively. Meanwhile, the pan-India vacancy rate that has been about 15-20% for the last three years is likely to be sustained with increasing absorption matching the growing supply. Developers such as Indospace and Embassy have shown interest in long-term participation in this sector.

Figure 1: Grade A and B warehousing space in India
Source: JLL, India

Table 1: Growth drivers and major demand generators for warehouse space

Other emerging factors that will help this sector grow in the long-term:

• E-retail: Eight to ten million square feet is expected to be absorbed by e-commerce players in the next two-to-three years
• Implementation of a Goods and Services Tax (GST): This tax will remove cost differences between states. As a result, prices charged by the organised players will fall, reducing the price advantage that the unorganised warehouses currently enjoy and leading to more organised warehouse development
• Cold-storage: Industries such as food processing, quick service restaurants, pharmaceuticals, aviation, chemicals and industrial products will drive growth

The interplay of infrastructure, technological advancements and the introduction of newer services associated with this sector will define the future. In addition, likely changes in government taxation policies and regulation of service providers will be important going forward. Interestingly, since 2012, we have seen huge investments by firms such as Warburg Pincus, Everstone, KKR, OPIC, New Silk Route, and SKF India and these will likely increase further in the coming years.

For further reading, please refer to our white paper “Indian logistics – Taking giant leaps forward”.

[1]Total investment proposed in infrastructure in 12th Five Year Plan (2012-17) is USD 892 Billion (2012–2017), Planning Commission, Government of India

[2] Four-wall-and-shed with sub-optimal size, inadequate ventilation and lighting, lack of racking systems, poor hygiene conditions and lack of stock management

[3] Modern setups with storage and handling points where raw materials, intermediate and manufactured goods are collected, assorted, stored and distributed to the point of consumption/sale

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