The advent & the exponential rise of of e-commerce has paved the way for increased demand of warehousing & logistics infrastructure across the country. The nature of the Indian warehousing market in the past was more traditional with the overwhelming dominance of Grade B or C warehousing structures. These spaces, although cheaper to rent were inadequately serviced and were poorly designed predominantly for storage only, which resulted in pronounced operational inefficiencies.

With the tectonic transformation in online & digital consumerism, the demand for world class logistics & warehousing facilities has skyrocketed in the post-Covid era. Same day deliveries of online purchases is no longer a service which commands a premium, rather it has become the norm in this extremely competitive market. Online shopping from Tier II & III cities has grown to more than 60% of the total market. This has generated a sharp spike in demand for world class Grade A warehousing facilities across the country, especially in Tier II & III cities. The addition of a relatively newer dimension of quick commerce companies like Blinkit, where focus is on 10-30 mins delivery, the need for integrated warehousing facilities near every major urban conglomerate is the new reality.

With Tier I cities leading the charge of hosting around 80% of these Grade A warehousing facilities, the industry catalysing push is coming from Tier II & III cities like Lucknow, Jaipur, Indore, Coimbatore, etc. which have become the prime targets of logistic park developers & institutional real estate investors for the potential that they offer to further reshape this economic space.

This growth in supply has been complemented by the ever increasing demand for such spaces by top MNC’s looking to expand their footprint while cutting on operational costs and increasing functional efficiencies. Just to give an example, warehouse leasing in Lucknow is seeing companies like Amazon, Flipkart, Mondelez, etc expanding aggressively to service one of the most densely populated markets of North India. Grade A facilities have popped up on major arteries of the city with key focus on warehouse leasing on Kanpur Road, owing to its prime connectivity with Kanpur, one of the major manufacturing hubs of the region.

Adding to these rapid economic changes in these cities, is the grand entry of top real estate focussed private equity funds & institutional investors who are looking to diversify their realty portfolios by investing in these lucrative ROI generating assets. Continuing with our previous example, there has been tremendous activity relating to warehouse purchasing in Lucknow with global private equity funds including Blackrock & Capitaland vying for real estate deals in the warehousing domain.

Owing to these developments, we confidently believe that Tier II & III cities are the next big thing in the Indian warehousing sector driven by high sustainable demand, availability of land at competitive prices and favourable government policies.