The year 2023 reported absorption of 37.8 Mn sq ft, 21% higher, compared to the previous year. Absorption has been on the rise since 2021, increasing gradually year over year. Despite dried-up investments in 2023, absorption surpassed the pre-pandemic level of 2019 by 15%.
The sector received investments worth USD 646 Mn in 2023, accounting for 15% of the total institutional investment received in the real estate sector. However, investments declined by 65% in 2023 over the previous year as investors opted for wait-and-watch mode amid global macroeconomic uncertainty.
Yearly Absorption Trend
| Year | Absorption (Mn sq ft) |
| 2019 | 33.0 |
| 2020 | 21.0 |
| 2021 | 30.2 |
| 2022 | 31.2 |
| 2023 | 37.8 |
Source: Vestian Research
In the past decade, 3PL companies emerged as a preferred choice for several businesses as these companies can optimize cost along with providing flexibility to their clients in case of demand uncertainty. As a result, the share of 3PL companies increased over the years and reached 44% of the overall absorption in 2023, followed by Engineering and Manufacturing companies with 18% share. Retail accounted for 11% of the overall absorption in 2023.
Sector-Wise Absorption (Mn sq ft)
| Sectors | 2023 | 2022 |
| 3PL | 16.5 | 14.0 |
| Engineering & Manufacturing | 6.8 | 4.8 |
| Retail | 4.0 | 3.7 |
Source: Vestian Research
Mumbai contributed the highest to the overall absorption in 2023 with 27% share. Its share has increased from 19% a year earlier. In absolute terms, absorption increased by 69% in the city, reaching 10.2 Mn sq ft in 2023. Heightened real estate activities during the year resulted in an annual appreciation of 4% in rentals.
On the other hand, Kolkata witnessed the highest annual decline of 23%, reaching 1.6 Mn sq ft in 2023. Its share has also declined from 7% in 2022 to 4% in 2023. Limited availability of Grade A warehouses in the city posed a challenge in meeting growing demand, leading to a decrease in absorption. Moreover, restricted absorption activities in the city during 2023 exerted pressure on rentals, resulting in an annual decline of 5%.
Absorption increased by 21% in NCR compared to the previous year, however, its share in the total absorption remained constant. The city’s strategic location and thriving e-commerce markets were major demand drivers. Robust demand for warehouses in the city resulted in an annual appreciation of 2% in rentals.
Pune registered a substantial annual growth of 35% in 2023, reaching an absorption of 7.0 Mn sq ft. This growth can be attributed to the presence of trade hub of Chakan MIDC, which hosts large manufacturing and logistics parks.
The southern cities (Bengaluru, Chennai, and Hyderabad) collectively contributed 27% to the total absorption in 2023, after reporting a decline from 34% share in 2022. In absolute terms, absorption decreased by 5% in these cities, reaching 10.2 Mn sq ft in 2023.
| City-Wise Absorption (Mn sq ft) | ||
| City | 2023 | 2022 |
| Mumbai | 10.2 | 6 |
| NCR | 8.8 | 7.3 |
| Pune | 7 | 5.2 |
| Bengaluru | 3.6 | 4.1 |
| Chennai | 3.5 | 2.9 |
| Hyderabad | 3.1 | 3.7 |
| Kolkata | 1.6 | 2.1 |
| Source: Vestian Research | ||
Shrinivas Rao, FRICS, CEO, Vestian said, “The Union Budget 2024-25 is expected to set the tone for next couple of years. Recent announcements of infrastructure development in the interim budget may have a positive impact on the sector. However, 2024 can be a challenging year for Indian warehousing sector as investments were on a downward trend in 2023.”
The sector is expected to expand at a CAGR of 10%-13% for next couple of years, predominated by third-party logistics and e-commerce enterprises. Grade A facilities are likely to be in demand due to their efficient and cost-effective methods.
About Vestian:
Vestian is an occupier-focused workplace solutions firm specializing in commercial, residential, industrial, retail and hospitality sectors. Headquartered at Chicago, Vestian has offices across US, India, China, UK, Sri Lanka and the Middle East. Our core strength lies in providing customized innovative solutions that are aligned to the client’s business objectives. Our extensive service portfolio includes Investment & Consultancy Services, Transaction Advisory Services, Project Services, Retail Business Solutions and Integrated Facilities Management Services. Vestian is the only global workplace solutions organization to be certified in both quality management systems and environmental health & safety standards such as ISO 9001, ISO 14001, ISO 45001 and ISO 37001.
