CBRE Report Highlights Surge in Warehousing Demand Driven by India’s Manufacturing Sector Growth

New Delhi / September 27, 2024: Real estate consulting firm CBRE South Asia Pvt. Ltd on Friday released its report titled, ‘Fortifying India’s I&L landscape with a new manufacturing growth formula’. The report reveals that the manufacturing sector’s growth has significantly contributed to warehousing demand.  

The share of sectors catering to the manufacturing space, including engineering & manufacturing, electronics & electricals and auto & ancillary sectors, within the total warehousing demand across major cities, has increased substantially, growing from 15% in 2019 to 24% in 2023 and 25% in H1 2024. The total leasing for warehousing from these manufacturing-related sectors stood at 4.1 mn. sq. ft. in H1 2024, CBRE South Asia said in a statement.

As per the report, Pune has shown the highest increase in warehousing and industrial space take-up by manufacturing players, growing from 6% in 2019 to 13% in H1 2024. Delhi-NCR and Kolkata have also seen notable increases, reaching 18% and 12%, respectively, in H1 2024. This surge is attributed to factors like adoption of the China + 1 strategy by global manufacturers and supportive policies such as the Production Linked Incentive (PLI) scheme, now covering 14 sectors.

India’s engineering and manufacturing sector has seen a significant surge in warehouse leasing. The report shows that the sector’s share of total warehouse leasing grew from 8% in 2023 to 11% in H1 2024. The top sub-sectors driving warehouse leasing from 2019 to H1 2024 include domestic appliances, auto components, and the automobile industry, reflecting robust demand across these key segments, the statement added. 

To reduce high logistics costs, the government is optimizing freight movement by shifting to more cost-effective and sustainable transport modes through various initiatives such as GatiShakti National Master Plan and logistics-specific reforms. 

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Anshuman Magazine, Chairman & CEO, India, Southeast Asia, Middle East & Africa, CBRE, said, “Amidst evolving global geopolitical landscapes and economic challenges, India presents a compelling opportunity for growth. India’s manufacturing sector is on the cusp of a transformative journey, attracting significant interest on the global stage. This remarkable trajectory is driven by a combination of factors, including a stable investment environment, strategic government initiatives, and a thriving domestic market.

Continued economic development in both leading and emerging Asia Pacific markets will boost consumer demand for manufactured goods and further fuel the growth of the region’s manufacturing sector”.

Rami Kaushal, Managing Director, Consulting & Valuation Services, India, Middle East & Africa, CBRE, said, “India’s robust industrial infrastructure has been crucial in driving its manufacturing sector forward. It emphasises the nation’s appeal for ease of business, encourages collaboration, and enhances productivity. Furthermore, it has attracted foreign direct investments (FDIs), driven export growth, and created substantial employment opportunities, cumulatively contributing to the manufacturing sector’s expansion.

Additionally, the government is taking steps to attract private capital and implement administrative reforms to streamline the planning and execution of infrastructure investments, aiming to improve efficiency”.

Ram Chandnani, Managing Director, Advisory & Transactions Services, CBRE India, said, “The government’s focus on “Make in India” and “Atmanirbhar Bharat” initiatives have set the stage for India’s manufacturing revolution. Strategic government initiatives, a thriving domestic market and a young and skilled workforce, are all coming together to make India a global manufacturing leader. India’s focus on trade agreements holds immense potential for its manufacturing sector and will act as a trade catalyst. This presents a golden opportunity for India’s manufacturers to diversify from the dominance of the services sector and capture a larger share of the global manufacturing pie”.

India’s push towards becoming a manufacturing giant requires leveraging advanced technologies to optimize production. Key challenges include delays in land acquisition, complex infrastructure financing, regulatory hurdles, and limited connectivity in industrial zones. Recommendations include establishing a single window clearance system, streamlining regulatory processes, enhancing connectivity, and fostering a domestic container manufacturing ecosystem through policy reforms, the statement added.