Resilient Growth Driven by 3PL and Manufacturing Sectors

India’s industrial and logistics real estate sector showcased remarkable strength in the July-September quarter of 2024, bolstered by robust demand in third-party logistics (3PL) and manufacturing sectors. As per industry analysis, this uptick in demand has translated into substantial absorption rates, positioning India as a significant player in the global logistics market.

Absorption Reaches New Highs with a 53.5% Increase

The sector’s absorption levels reached an impressive 17.5 million square feet, marking a 53.5% year-on-year increase compared to 11.4 million square feet during the same period in 2023. This surge in demand was driven primarily by Tier I cities, which alone accounted for 14 million square feet or 80% of the total absorption. In contrast, Tier II and III cities contributed a combined 3.5 million square feet, highlighting their emerging but comparatively modest role in the sector’s growth.

Third-Party Logistics and Manufacturing Lead Demand

According to market insights, the sustained demand from the third-party logistics sector was a significant driver, representing 38% of the total absorption. This demand was closely followed by the manufacturing sector, which contributed 16% of total space absorbed. The fast-moving consumer goods (FMCG) and fast-moving consumer durables (FMCD) sectors also recorded sharp growth, together accounting for 17% of the absorption. These sectors’ demand for warehousing and logistics infrastructure underscores the shifting landscape toward efficient supply chain operations.

Increased Supply Reflects Sector Confidence

Alongside rising demand, the sector also saw a fresh supply influx, with 19.3 million square feet of new space introduced in the July-September quarter—representing a 9% year-on-year increase. This fresh supply, a testament to sectoral confidence, indicates that the industrial and logistics market is set on a growth trajectory, supported by key industries and sectoral expansion plans.

Diverse Sectors Drive Value Creation and Expansion

According to industry experts, businesses across sectors like FMCG, FMCD, electronics, defense, and apparel are redefining strategies to enhance value creation and capture growth opportunities. This shift is partly attributed to the increasing demand for logistics solutions, notably by 3PL companies, which now meet a large portion of industrial requirements while planning consolidations to optimize their business needs.

Quick Commerce and Urban Logistics Emerge as Key Trends

The quick commerce segment, particularly urban logistics, is emerging as a new trend within the logistics sector. Many e-commerce companies are exploring pilot models focused on quick delivery services, tapping into rapid urbanization and changing consumer preferences to gain competitive market share.

Boosted by Government Initiatives and PLI Scheme

India’s position in the logistics and manufacturing landscape is also bolstered by the government’s Production-Linked Incentive (PLI) scheme, infrastructure upgrades, and supportive policies targeting these sectors. Experts highlight that such initiatives are paving the way for sustainable growth, helping India cement its role as a rising force in the global logistics industry.