Emerging Tier 2 and 3 Cities Drive Growth in India's Warehousing Sector
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Synopsis
A recent report highlights that India's warehousing stock reached 533.1 million square feet, with tier 2 and 3 cities contributing approximately 100 million sq ft, reflecting a significant shift in logistics strategies and investment opportunities in these emerging markets.
Key Takeaways
- India's warehousing stock totals 533.1 million sq ft.
- Tier 2 and 3 cities contribute 100 million sq ft.
- Shift towards hub-and-spoke model improves logistics.
- E-commerce growth drives demand for fulfillment centers.
- Government initiatives support logistics development.
Mumbai, Feb 13 (NationPress) India's total warehousing inventory reached 533.1 million square feet last year, with developing tier 2 and 3 cities now accounting for roughly 100 million sq ft, or about 18.7 percent of the overall inventory, as reported on Thursday.
This transition marks a significant alteration in the nation's logistics framework towards a hub-and-spoke model, enhancing last-mile delivery capabilities as anticipated during the rollout of the Goods and Services Tax (GST), according to a report from prominent real estate firm JLL.
The Indian warehousing sector has seen extraordinary expansion in major urban areas since the GST was implemented. Growth is now extending to emerging tier II-III cities as the hub-and-spoke model continues to evolve. The newly emerging cities witnessed an impressive 100 million sq ft of warehousing stock in 2024, a four-fold rise since 2017, the report indicated.
The surge in these cities is driven by numerous factors. The e-commerce explosion, especially the prevalent ‘click and buy’ trend, is revolutionizing India's warehousing landscape. This has resulted in a heightened demand for fulfillment centers closer to end users. Companies are also establishing smaller warehouses in these regions to enhance delivery times and cut logistics expenses.
These cities provide access to larger spaces due to their lower population density, making them ideal for warehouses situated near consumption centers, the report stated.
“This momentum is anticipated to persist, propelled by essential infrastructure projects linking these emerging cities with major consumption hubs. This swift development is generating investment potential for both investors and developers within the logistics field. This trend not only reshapes India's logistics environment but also offers significant returns for those ready to seize this expanding market,” stated Yogesh Shevade, Head – Logistics and Industrial, India, JLL.
Government initiatives like PM Gati Shakti, Bharatmala, Sagarmala, UDAN Scheme, and the creation of freight corridors have optimized distribution networks. Initiatives such as 'Make in India', 'Digital India', and the National Logistics Policy have cultivated a favorable manufacturing ecosystem across the nation.
The launch of Production-Linked Incentive (PLI) and Design-Linked Incentive (DLI) schemes has encouraged companies to establish manufacturing bases in these cities.
“This transition signifies a fundamental shift in India's logistics framework. It opens new avenues for businesses to optimize their supply chains, lower costs, and enhance delivery times. As Tier II-III cities gain importance, they are altering the competitive landscape of India's logistics sector and propelling the future growth of the warehousing industry,” the report emphasized.
