Scope of warehousing in India

Warehousing in India is a lucrative and desirable asset class of late for sure. The government’s granting industry status to Infrastructure and logistics has opened newer avenues as far as the availability of funds for growth in this sunrise sector is considered. Introduction of GST has galvanized the sector towards an enhanced throughput and industry-wide consolidation. Towards a new regime in Delhi, people have given their verdict and have chosen Narendra Modi yet again to lead the country through to 2024. It’s a reflection on Modi’s performance in the last five years as much as it is an indication of people’s aspiration in the years lying ahead. Their reposed faith in giving a decisive mandate augurs well for a stable government and for sound commerce and economics therein. In the recently concluded budget, the government is committed to investing INR 100 Lakh Crore in infrastructure over the next 5 years. This was much needed and it puts the focus on where the crux lies. The government has proposed to build 125000 km of roads for which investment to the tune of INR 80,250 crores has been allocated.

The Indian warehousing sector is poised for a transformation towards superior Grade A warehousing. Despite the recognition of logistics being a critical driver of economic development, logistics cost in India at 13-14% of GDP, is very high compared to that of USA (9-10%), Europe (10%), and Japan (11%). An efficient warehouse leads to a reduction of 15-20% of the cost in the entire logistics operations.

The Indian warehouse leasing market grew by more than 45% in 2018 and the demand for warehouse leasing in India is likely to touch almost 60 million sq. ft. with e-commerce being one of the key drivers. At least 22 million sq. ft. of this supply is estimated to be in the grade A warehousing category. The warehouse leasing crossed 25 million sq. ft. mark in 2018, which was more than 45% year-on-year growth. E-commerce in the overall warehousing leasing has increased from 10% in 2017 to 23% in 2018. At the same time, India aims to bring down its Logistics Performance Index. The changing consumer behaviour, the onslaught of technical evolution and the continued demand for superior Grade A warehousing space, all of them will together give a fillip to the warehousing in India and the logistics sector. The transformation of Grade B & Grade C warehouses into superior Grade A warehousing facilities is visible now. New technologies such as Artificial Intelligence, Cloud Computing, Blockchain Technology, Internet of Things etc. are being used by the logistics sector to streamline processes and ensure a smoother interface. The increasing demand is being managed with an agile supply all because the system has been in place to allow efficiency and speed.

60% of the logistics through road

The heart of India’s logistics transport system lies in its widespread and robust road network, occupying a notable share of 60% in the entire logistics transport system in contrast to the global average of 30- 40%, as mentioned in the latest report published by JLL Industrial Services Research. The report featured the growth of the warehousing sector concerning the surge in domestic and foreign investors. It stated that the warehousing sector has witnessed around 8 mn sq. of absorption in 2019 alone. The research paper primarily stressed on the importance of road transport for connectivity of production houses to consumer and warehouse and how to optimize the use of roads by improving hinterland infrastructure and storage space. The Central Government is planning on devising a comprehensive plan to invest in major infrastructures ports, airports and rail among others with an estimated investment outlay of about INR 100 lakh by the next five years. The report also talked about the need to achieve cost efficiencies via specialization and consolidation of storage and modes of transport. This would pertain to logistics facilities, private freight terminals, dry ports (ICDs/CFS), waterways terminals and specialized storage spaces like cold storage etc. The report also foresees rail linked logistics facilities for multi-modal connectivity to be the major focus for future logistics sector development.

The head – industrial services, JLL India stressed on India’s booming growth in the domain of logistics and warehousing over the past decade and how it did not come as a surprise, owing to the many projects and steps that were taken towards it. India’s road, rail, port, airport and inland waterway added a new dimension in the growth story comprehensively for the Government-sponsored Bhartmala, Sagarmala, Jal Marg Vikas Project, Railway station re-development etc. creating a huge platform for future expansion of logistics infrastructure. According to the much-awaited National Logistics Policy, it was said that through the National Logistics Policy, the Central Government is focusing on the development of a fully integrated logistics network with modern technology and automation. It was also announced how JLL Industrial Services is launching Port, Airport and Global Infrastructure (PAGI) Practice in keeping with the recent developments in this sector. This, he believes, will aim at multi-dimensional service opportunity for global and domestic clients alike. There was also a stress on the need for prioritizing security and transparency in the sector. It underlines the obstacles that lie on the path of creating efficient last-mile connectivity and making land available to develop financially sustainable logistics infrastructure, capacity building for human resource, and investment-friendly policy framework for attracting private capital for the sector. The need for faster commercial regulations was also highlighted, along with the pressing need to achieve cost and time-efficiency and minimization of in-transit losses.

Launch of Log-X platform

Global trade enabler DP World has taken a step towards the digital transformation of the logistics sector with the launch of Log-X, a national technology accelerator platform for logistics. Log-X aims to catalyze the start-up community to build smart trade solutions using digital technology to revolutionize the logistics sector. The accelerator programme will be run in cities like Mumbai, NCR and Bangalore, in partnership with Invest India, Kerala Start-Up Mission to bring out innovation and adopt technology in the Indian logistics sector. The programme will focus on digital technologies like Blockchain, Artificial Intelligence, robotics, simulators and Internet of Things (IoT). It will seek to identify logistics-focused technology start-ups through the Startup India portal and will look to bring on board up to 10 selected start-ups for conducting pilots. The programme will extend industry credibility to the selected start-ups, offer an opportunity to do a Proof of Concept (POC), give them access to DP World’s network of customers, partners, mentors and investors, and offer the potential to raise strategic capital. The finalist start-ups will be mentored by the DP World leadership team and external mentors.  Infrastructure building is the key to actually building logistics efficiency and to bring the cost of logistics down in India. The 13-14 percent [cost of logistics] that exists in most publications and journals as a percentage of GDP, has to come down to 8-9 percent which is what most developing economies have. This has two implications;

  1. It makes Indian exports more competitive. For every 10 percent reduction on the cost of logistics, there is a 10 percent jump in exports. It’s a very strong correlation. The cost of logistics has a very important role to play in terms of achieving GDP growth, in ensuring the Indian economy is out there competing with all the other economies.
  2. The shift to multi-modalism. Sixty-five percent of the freight in India is by trucking, while in most developed economies it is 25 percent. There has to be a shift from trucking to other modes of transport. We want to be the company that makes the choice available to Indian exporters-importers and people in the logistics business. These are the two big trends that I’d like to focus on.” Light Metric, founded in February 2015, helps enterprises with large fleet operations monitor driver behaviour to improve safety, efficiency and compliance. CredAble, founded in March 2017, operates in the finance space facilitating early payment solutions. Wobot Intelligence is an AI-first plug and plays SaaS that uses business’ underutilized video data from existing CCTVs using innovative action recognition/prediction and person re-identification architecture to help them manage their
    business more efficiently.

Demand for space

Like nearly every company making the move to order fulfilment is experiencing, challenges abound—and one of the biggest is finding space…any space. “Almost every place in the country is severely constrained,” “And the options are few for users entering the market. Finding the right building is important, but finding the best location is tougher. ”Most users today need buildings that can accommodate materials handling systems and equipment, ceiling heights, internet bandwidth, and, externally, ample apron parking so that goods can be moved in and out of the facility without restraint. “Companies are finding that they must do more for trailer storage so that a driver can drop one trailer off and pick another up,”.Then there’s the issue of providing parking for truckers who have timed out on their driving hours per FMCSA rules. If the facility was built 25 years ago, it’s probably not appropriate.” The trend for time-specific deliveries is especially accelerating last-mile concerns, causing many DCs to be located near urban centres to be closer to consumers. Given the shortage of space in some markets, some users are turning to adaptive reuse of older industrial properties in cities like Baltimore, Philadelphia, Boston, Chicago and Toronto. “This has caused an interesting renaissance for older buildings,” “These buildings do require refitting, as modern warehouses are not the same of as older facilities.” However, at the top of the list of site selection concerns now is finding and retaining employees given today’s low unemployment rates. Enter a human-centric design. Companies that have put an emphasis on quality of life and positive work culture and have been able to effectively attract and retain employees, even when in direct competition with some of the largest industrial occupiers in the market. Given the uncomfortable temperatures in warehouse and DC facilities, heating and air conditioning is the most obvious amenity that could be offered to workers. But historically, such temperate environments have been uncommon. “Putting AC and heating in these buildings comes at a big cost,” “And depending on how the lease is written, the utility bill either goes go to the owner or the tenant.” Today more buildings are being built with comfort in mind. “Workers still go to work where the salaries are the highest”. “However, they will also go where they are more comfortable.” Other amenities are finding their way into DCs such as basketball and bocce ball courts, lunch facilities, locker rooms, ping pong tables and workout rooms.


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