Urban Warehousing on the Rise: A Closer Look at Mumbai Metropolitan Region

The Mumbai urban warehousing market has witnessed a significant surge in demand throughout the year, mainly driven by the growing importance of last-mile delivery and the strong growth of quick commerce. 

Emerging Urban Warehousing Sector in India

In-city warehousing is experiencing rapid growth in metro cities of India as it enables quick access to inventory, reduces transportation costs, quick turn-around time, and improves last-mile delivery capabilities. The growing importance of last-mile delivery, urbanization, boom in organized retail and time sensitivity of delivery of perishable goods are driving the In-city distribution segment. 

At present, warehouses in Indian metro cities are located outside the city limits, away from the customer base. The rising popularity of quick commerce companies and e-commerce, e-grocery, express delivery companies are focusing on improving the last mile delivery and customer experience has resulted in rapid growth of Urban warehousing.

Dynamic urban landscape of Mumbai

Mumbai, the largest metropolitan, and the world’s ninth most populous city as of 2022, Mumbai is known as the commercial and financial capital of India and has a strong and diverse economy, which contributes significantly to India's overall economic growth. With its extensive network of expressways and intra-city railway systems, Mumbai already possesses a substantial infrastructure setup. 

The Mumbai Metropolitan Region (MMR) has operational industrial and warehousing stock of 54 million sq. ft as of May-2023, the second highest in the country. The city has seen robust activity in recent years with the absorption rate peaking at 6.3 million sq. ft in 2022. The increasing e-commerce platforms, expanding 3PL sector, greater implementation of technology are major growth drivers for warehousing sector. 

Growing In-city distribution market in Mumbai

As one of the largest cities in India, Mumbai has witnessed the growing popularity of the online shopping and app-based delivery services in recent years. This surge in demand has led to an increased need for urban warehouses to ensure efficient and timely deliveries. However, the in-city distribution system in the city encounters several challenges, including traffic congestion, ingress and egress of vehicles, and the need for warehouse structures that comply with regulations such as fire NOC and approved plans, limited availability of supply and proper warehousing infrastructure in most parts of the city.

At present, the city has ~ 1.2 million sq. ft of occupied urban warehousing stock located in South Mumbai (Churchgate to Sion), Western Mumbai (Andheri to Mira Road), Central Mumbai (Sewri to Mulund) in locations such as Byculla, Sewri, Worli, Kurla, Bhandup, Mulund, Andheri, Goregaon, and Mira Road, among others. The locations such as Vikhroli, Kanjurmarg, Bhandup, and Mulund are among the upcoming hotspots for in-city distribution in Mumbai. A significant portion of urban warehouses in Mumbai are located in vacant sheds, buildings which were built for industrial & different commercial purposes, including offices, restaurants, grocery stores/supermarkets and mainly situated on the ground floors, come in varying sizes, typically ranging from 4,000 sq. ft to 20,000 sq. ft. The rental values range between INR 75-120 per sq. ft per month depending on the location, which is much higher compared to traditional Grade A warehouses located outside the city.

Rental Values In-city warehouses in Mumbai as of June 2023

 Source: Savills Industrial Research

Outlook

Mini distribution hubs are emerging in the major locations of Mumbai city, and we expect this trend to penetrate across the entire city in the near term. Looking at the growth potential, Mumbai will need to create a yearly supply of 2-3 million sq. ft of urban warehouses to meet the growing demand over the next 3 years. To meet the increasing demands, it is necessary to establish warehouses and fulfillment centers within city limits, situated in closer proximity to the end customers. It is anticipated that custom-made urban warehouses & ramp up warehouse (multi floor) will likely emerge in the coming years. Major real estate funds are expected to invest in in-city warehousing developers to capitalize on the opportunity and diversify their investment portfolios.