Tier 2 and 3 cities emerge growth drivers in India’s warehousing sector

Mumbai:  India’s total warehousing stock reached 533.1 million square feet last year, with emerging tier 2 and 3 cities now contributing approximately 100 million sq ft, or about 18.7 per cent of the total stock, according to a report released on Thursday.

This shift represents a fundamental change in the country’s logistics map towards hub-and-spoke model, improving last-mile delivery capabilities as envisioned during the implementation of goods and service tax (GST), said the report by leading real estate firm JLL.

The Indian warehousing market has experienced remarkable growth in major cities since implementation of GST. Growth is now expanding to emerging tier II-III cities as hub and spoke model is playing out. The emerging cities saw noteworthy 100 million sq ft of stock in 2024, a four-fold increase since 2017, the report stated.

The growth in these emerging cities is driven by several factors. The e-commerce boom, particularly the widespread ‘click and buy’ trend, is transforming India’s warehousing. This has led to increased demand for fulfillment centres closer to end consumers. Companies are also setting up smaller warehouses in these cities to improve delivery times and reduce logistics costs.

These cities also offer access to larger spaces due to lower population density, ideal for warehouses near consumption centres, according to the report.

“This momentum is expected to continue, fuelled by critical infrastructure initiatives that are linking these emerging cities with major consumption hubs. This rapid development is creating investment opportunities for both investors and developers in the logistics sector. This trend is not just reshaping India’s logistics landscape, but also offering decent returns for those ready to capitalize on this burgeoning market,” said Yogesh Shevade, Head – Logistics and Industrial, India, JLL.

Infrastructure initiatives undertaken by the government such as PM Gati Shakti, Bharatmala, Sagarmala, UDAN Scheme, and the development of freight corridors have optimised distribution networks. Programmes such as ‘Make in India’, ‘Digital India’ and the National Logistics Policy have fostered conducive manufacturing ecosystems across the country.

The introduction of production-linked incentive (PLI) and design-linked Incentive (DLI) schemes has incentivised companies to set up manufacturing facilities in these cities.

“This shift represents a fundamental transformation in India’s logistics landscape. It offers new opportunities for businesses to optimise supply chains, reduce costs and improve delivery times. As Tier II-III cities continue to grow in importance, they are reshaping the competitive dynamics of India’s logistics sector and driving the future growth of the warehousing industry,” the report noted.

–IANS