The sustained increase in demand, driven by rapid manufacturing expenditures, aggressive e-commerce growth, and the expansion of 3PL (third-party logistics) firms, has assisted in pushing up warehousing rentals across India’s key logistics property markets. Based on their performance in 2022 and a promising view for 2023, Indian cities like Bangalore, Delhi NCR (National Capital Region), and Mumbai have been catapulted by the increase in rental values into the top 10 logistics markets in Asia Pacific. Mumbai placed sixth among these cities in the logistics market for the Asia-Pacific region in terms of yearly rental increase. The data showed that in 2022, at Rs 22 per sq ft per month, the city had a 9.3% increase in rental prices from the previous year. In 2023, an extra 1.1 million square feet of warehouse space is anticipated to become available in the Mumbai area.
Indian warehouse market has seen a significant rise in rentals on the back of robust growth in demand throughout the year
Indian warehouse market has seen a significant rise in rentals on the back of robust growth in demand throughout the year. The manufacturing and 3PL (third-party logistics), sectors were the major growth drivers in 2022 and should maintain momentum in 2023 as well. According to the reports, healthy rent growth was observed last year, across all markets following years of stagnation, and is likely to remain in positive territory in 2023, as the market responds to the higher base-level expectations from occupiers as well as a positive demand outlook.
Except for Bangkok, where rent contracts decreased by 0.1% for the first time since the pandemic began, prime logistics rents across 17 important Asia-Pacific cities were stable or rising throughout the year. In contrast, Australasia continued to perform better than other markets, with an average annual growth rate of 12.9%. Sydney led the region as a whole in terms of rental growth, growing by 29.6% annually.
The lack of high-quality supplies is predicted to be accompanied by an increase in logistics rents in 2023.
For the first time since the pandemic, rental growth was negative as a result of deteriorating sentiment. Inflation and high-interest rates are encouraging companies to reassess or consolidate their inventory. The good news is that there is still a high need for cold chain facilities, particularly in the Asia Pacific where customers continue to choose e-commerce grocery shopping. The lack of high-quality supplies is predicted to be accompanied by an increase in logistics rents in 2023.
Based on annual rental growth, Bangalore ranked eighth among other Indian cities in the Asia Pacific logistics markets. At Rs 20 per sq ft per month, the city will see a 6.4% increase in rental prices in 2022. In 2023, the city is anticipated to receive 0.5 million square feet more in storage space. Delhi-NCR (National Capital Region) ranked ninth in the region with a 5.9% increase in monthly rentals at Rs. 19 per square foot, and 1.1 million square feet of warehouse space is anticipated to be made available in the city by 2023. All three of India’s major cities have a positive rental outlook for 2023.
In the upcoming years, it is anticipated that the warehouse and logistics sector of the real estate market, which has proven to be comparatively resilient to the pandemic’s shocks, would continue to grow and attract more investment.