Emerging Demand for Warehouses - Reliant Institute of Logistics

Emerging Demand for Warehouses

Warehousing and logistics sector is estimated to attract nearly $10 billion investments over the next 4-5 years. With the addition of around 200 million sq ft warehousing space across India, total supply is expected to nearly double by 2022, estimated JLL India.

With the expansion of e-commerce operations across the country, there has been a corresponding rise in demand for space from these companies in both tier I and II markets and this is supposed to add to robust growth in Delhi NCR, Mumbai, Pune, Bengaluru and Chennai. Warehousing and logistics sector has been growing steadily since 2017 when it was granted infrastructure status. The introduction of Goods and Services Act, the formation of a Logistics Department under the ministry of commerce and industry and various other policy changes have directly or indirectly resulted in the growth of the logistics sector.

There is an emerging demand for warehousing and logistics space from tier II cities like Coimbatore, Guwahati, Lucknow, Jaipur & Ludhiana.

The year 2018 witnessed a 22% growth in total stock in Grade A & B warehousing space in top eight cities at 169 million sq ft compared to 138 million sq ft year ago, absorption clocked an unprecedented growth of 60% year-on-year growth to nearly 32 million sq ft latest year from around 20 million sq ft in 2017. The robust growth in absorption reflects demand outstripping supply significantly and vacancies dropping below 10% level for the first time ever, showed data from JLL India.

With 24% investment in India in 2018, warehousing and industrial segment is expected to retain strong momentum over the next few years.

A number of private Indian developers are already considering investments into the investable grade real estate. These include Musaddilal, Panchshil, GWC, FWS, Hiranandani, Lodha Group, Jalan Group, Srijan, Apeejay, AllCargo among others.

Established and newer foreign funds-managed developers are considering different entry strategy. These include joint ventures, joint developments and acquisition of existing portfolio. Some of these names include Altico Capital, Ascendas FirstSpace, ESR, Hindustan Infralog (DP World + NIIF), IndoSpace, Embassy, LOGOS India, Morgan Stanley and Proprium.

Among sectors, third-party logistics (3PL) companies, e-commerce, auto & ancillary, retail and fast moving consumer goods (FMCG) companies accounted for around 60% of the absorption during the year.

Delhi NCR, Mumbai, Pune, Bengaluru and Chennai continued to be the top five markets in terms of demand & absorption. While Chennai, Pune and Ahmedabad registered significant demand from the manufacturing sector, Kolkata emerged as a major logistics hub due to its consumption and district and distribution advantage.

“A dearth of good quality and ready supply in the market has forced occupiers to go for Built-to-Suit (BTS) developments that accounted for almost 26% of total absorption in 2018. However, in line with the demand and requirements, the developers are also aligning themselves to focus on creating quality spaces


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