As the government focusses on making India a global manufacturing hub, industrial and warehouse logistics supply is projected to grow by 13-14 per cent year-on-year (YoY) in FY25 to nearly 424 million square feet (sq ft), a report showed on Tuesday.

The growth in warehousing space in India's eight major cities is buoyed by strong demand from the e-commerce, manufacturing and logistics sectors.

Grade A warehouses will take up a bigger share of the market, according to the ICRA report.

Moreover, the absorption is estimated to increase to 47 million sq ft in FY25 (90 per cent of incremental supply addition) from 37 million sq ft in FY24, supported by strong consumption-led demand, the report noted.

“Over the last five years, the Grade A warehouse stock in the eight primary markets has grown at a healthy CAGR of 21 per cent to 183 million sq ft in FY24 and is estimated to increase further by 19-20 per cent YoY in FY25.

“Over 50-55 per cent of the current Grade A stock in India is backed by global operators/investors such as CPPIB, GLP, Blackstone, ESR, Allianz, GIC, and the CDC Group, etc,” said Tushar Bharambe, AVP and sector head – Corporate Ratings, ICRA.

The long-term growth prospects for the Grade A warehouses are supported by the growing preference of the tenants for modern, efficient, and ESG-compliant warehouses, he added.

The vacancy in the eight primary markets stood at 10 per cent in FY24 and is likely to remain at a similar level in FY25.

The sector continues to witness a sustained demand from the third-party logistics (3PL) and manufacturing sectors, which together accounted for 65 per cent of the total leased area (as of March 2024) while the share of e-commerce stood at 15 per cent.

Among the eight primary markets, around 42 per cent of the warehousing stock was contributed by Mumbai and Delhi-NCR, while the overall occupancy remained healthy at around 90 per cent.

“ICRA expects the credit profile of the operators to remain stable, driven by healthy occupancy levels, expected rental escalations leading to increased rental income, and comfortable leverage metrics,” said Bharambe.

--IANS