Structural reforms including the awarding of infrastructure status and the implementation of Goods and Services Act have bolstered the demand for logistics and warehousing space in the country. As a result, demand has outstripped the supply of Indian Logistics and Warehousing.
January-March period of 2019 has witnessed 8.4 mnsqft of absorption
• Structural reforms and implementation of GST have bolstered demand for logistics and warehousing space
• 56% of the total 32 mnsqft of industrial and logistics leases in 2018 were in Grade A spaces
• Indian logistics and warehousing industry is expected to grow by 2020
The annual demand of around 32 mnsqft has outstripped the supply of 31 mnsqft witnessed for the first time in the last four years. With January-March period of 2019 already witnessing 8.4 mnsqft. of absorption, it is expected to clock approx. 38 mnsqft by end of 2019. With high demand, lease transactions have remained high so far, it added. Alongside the rise in transactions, the share of Grade A spaces leases have also gone up in the past four years. Of the total 32 mnsqft of industrial and logistics leases in 2018, 56% were concluded in Grade A spaces. Sectors such as 3PL/logistics, engineering, auto & ancillary, e-commerce, FMCG, retail and telecom & white goods have remained the biggest demand drivers. As a result of the high demand, the logistics sector is expected to grow to US$ 215 bn by 2020. The infrastructure status has added strength to the development pace. GST implementation has brought in a uniform tax regime and has removed the challenges relating to the logistics supply chain, making it easier for operators in the space to expand across geographies. There is huge potential in the logistics and warehousing sector. With the high demand for high-quality logistics facilities and increasing market maturity, space is set to grow from this stage. However, the development side continues to witness challenges on account of problems such as land aggregation, tax parity etc. As per reports, we will witness the easing of these challenges with further reforms. The logistics sector, as a result of these developments, has witnessed a regular upward trend in average rents in the past three years and the trend is expected to continue in coming years. The liquidity infused by global investors is prompting the market to move towards organized and globally accepted warehousing space — Grade A/globally accepted warehousing space has more than 50% savings on rent per pallet position over Grade B spaces. While in operation, in the future we will see mechanised and automated material handling facilities. These will bring in the much-needed efficiency enhancement leading to as much as reduction of up to 30 per cent in logistics cost. In a well-maintained warehousing facility, technology and planning of maintenance can optimise Common Area Maintenance charges significantly.
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