ICRA forecasts 13-14 percent YoY growth in IWLP supply, reaching 424 million sq ft this fiscal.
The Industrial and Warehouse Logistics Park (IWLP) supply is projected to increase by 13-14 percent year-on-year, reaching approximately 424 million square feet in the eight primary markets this fiscal, driven by robust demand, according to an ICRA report released on Tuesday. The report anticipates an absorption of 47 million square feet in FY25, up from 37 million square feet in the previous fiscal.
The IWLP sector is experiencing sustained demand, particularly from third-party logistics (3PL) and manufacturing sectors, which together comprised around 65 percent of the total leased area as of March 2024. E-commerce accounted for 15 percent of the leased area. These growth projections are based on ICRA’s rated portfolio, which includes 58 entities across 17 cities, totaling around 34 million square feet of leasable area.
In the eight primary markets, Mumbai and Delhi-NCR contributed 42 percent of the warehousing stock as of March 2024, with overall occupancy remaining healthy at approximately 90 percent. Vacancy rates stood at 10 percent in FY24 and are expected to remain similar in FY25.
The logistics and warehousing sector’s infrastructure status, rapid expansion of e-commerce, and the government’s focus on making India a manufacturing hub have driven significant growth in warehousing demand. Tushar Bharambe, Assistant Vice President at ICRA, highlighted that the Grade A warehouse stock in the eight primary markets has grown at a CAGR of 21 percent to 183 million sq ft in FY24, with a further 19-20 percent YoY increase anticipated in FY25.
For the incremental Grade A supply addition of 35 million sq ft in FY25, the absorption is projected to be around 29 million sq ft. Consequently, the share of Grade A stock in the total warehousing supply is expected to rise to 51 percent by March 2025 from 49 percent in the previous fiscal. Over 50-55 percent of the current Grade A stock is backed by global operators and investors.
Despite positive growth prospects, rising land prices present challenges, although rentals remain competitive due to numerous domestic and global players and the emergence of new micro markets. The report notes that tier-II and tier-III cities are becoming more cost-effective for new Grade A warehousing developments. ICRA expects operators’ credit profiles to remain stable, with high occupancy levels, rental escalations, and comfortable leverage metrics. For ICRA’s sample set, occupancy is estimated to stay high at 93-95 percent in FY24, with rental income and net operating income (NOI) expected to grow by 30-32 percent YoY in FY25.
