Growing demand for warehouse space for manufacturing, cold chain, pharma, organised retail, and e-commerce has been driving warehousing demand since 2017 and will continue to do so into 2023. India, being a consumption economy with a large consumer base, has seen increased demand for warehouses from the manufacturing and e-commerce sectors as well as increased demand from tier II and tier III cities. The warehousing segment has emerged as a strong sentiment industry for top-end manufacturers to push their final products with the flexibility afforded by Third Party Logistics (3PL) companies to manage non-core manufacturing processes like packaging and distribution. In addition, the industrial and logistics sub-asset class as a whole has continued to rise thanks to robust macroeconomic fundamentals and government policy assistance. 

The E-Commerce Boom

The rise of e-commerce has provided a significant boost to the warehousing sector, allowing it to set a new standard on a worldwide scale. An increase in online purchases and the subsequent expansion of India's logistics and warehousing industry can be directly attributed to the pandemic. Investment in warehouses has long been prioritised by financial backers. It is expected that the industry will continue to meet this need.

Impact of Ongoing Geopolitical Issues on the Warehousing Sector

Following the Russia-Ukraine war, basic costs of all commodities skyrocketed, greatly affecting the Return on Investment (ROI) on new warehouses being built. Steel prices peaked in the first and third quarters of this year. Aside from a noticeable change in construction costs, COVID-19 also generated some modest increases in material costs and disruptions in the supply chain. Because of growing material prices, such as crude oil, steel, aluminium, cement, labour, equipment rental charges, and plumbing and fixture expenses, construction costs have risen. So, various other technological options were investigated. Some suggested replacing steel members with a precast RCC purlin system to save steel consumption. 

Costs for both skilled and unskilled manpower have increased as well, pushing developers and builders towards off-site fabrication techniques like the use of precast walling systems as an alternative to traditional blockwork, and the installation of heavy pavers for the construction of crucial external roads and holding spaces in a huge warehouse. Skilled manpower in the construction industry is sourced from a few specific geographies which adds to the cost of labour. This could be addressed by establishing skill development centres across key geographies thereby improving the socio-economic condition of those geographies and creating all - round development.  

The Way Forward - Trends and Innovations

Sustainability Trends

As the sector develops, sustainability and energy consumption in warehouses will also be evaluated. Environmental, Social, and Governance (ESG) indicators have a significant impact on the organisation's growth prospects and highlight its sustainability practices. Meeting ESG norms has become a tool for organisations to examine the social effect of their actions. Compliance norms, emission reductions, green efforts, and corporate social responsibility are examples of ESG standards. Leading organisations in the sector have become more conscious of ESG metrics and have begun to incorporate and share their sustainability goals. 

According to the 2022 Sustainable Development Report, India is ranked 121 in comparison to Finland, which is ranked first on the list, followed by the United Kingdom.

Innovation in Warehousing

Multi-level warehousing development has caught on as a trend in locations where real estate costs are high and space is limited. The provision for trucks to drive through over numerous floors to fulfil the loading and unloading needs of the warehouse's occupants is a unique feature of this development. Despite the fact that this contributes a negligible amount to overall growth, it is quickly catching up. This is best suited to warehousing players that prefer to stay close to the city and concentrate on city-wide distribution.

Beyond the multi-level warehouse, where the scale of expansion is larger, smaller types of warehouses are quickly catching up. In city centres, storage chains are being built. These include modest sorting and delivery centres ranging from 3,000 to 4,000 square feet in size. This can be attributed to the e-commerce and perishable goods delivery segments, which are booming across the country.

It is critical to automate warehousing activities to preserve efficiency. Modern-day warehouses use varied mechanised equipment for their operational needs, which include Automatic Storage and Retrieval Systems (ASRS), picker systems, sorters, forklifts, and conveyor systems. Other trends that are catching up include the usage of Autonomous Mobile Robots (AMRs) and Automated Guided Vehicles (AGVs) to reduce human interface.

While demand for industrial and warehousing facilities is expected to remain unscathed in the long term, the multifold increase in demand is going to be driven by the manufacturing sector in the next few years.