Demand primarily driven by third party logistics firms and e-Commerce sectors
New Delhi, August 28, 2015 – Real estate transactions activity in the industrial and logistics segment remained fairly strong during the first half of the year, as against the second half of last year. According to CBRE’s India Industrial and Logistics Market View for H1 2015, approximately 6 million sq. ft. was taken up by warehousing space occupiers—translating to a growth of nearly 75% over the previous six months, and about 60% on a year-on-year (y-o-y) basis.
Demand for logistics and warehousing spaces was primarily concentrated in the Delhi National Capital Region (NCR) (27%), Mumbai (31%) and Bangalore (18%); while other cities saw stable transactions. Close to 4.5 million sq. ft. of space was absorbed in these three cities during the period, a growth of approximately 110% over H2 2014, and around 103% on an annual comparison.
Third Party Logistics (3PLs) with 32% share of total leased space in H1 2015, e-commerce (22% share), and fast moving consumer goods (FMCG) (15% share) were the principle demand drivers of warehousing space during the first six months of 2015. Interestingly, select 3PL and express transportation companies took up spaces exclusively to cater to online retailers, indicating the prominence of e-commerce as a dominant driver of warehousing / logistics demand across the country.
Commenting on the findings of the report, Mr. Anshuman Magazine, Chairman and Managing Director of CBRE, South Asia Pvt. Ltd. said, “An improving domestic economy and legislative reforms have been encouraging an increasing number of foreign firms to establish their manufacturing bases in India. Warehousing and food storage service providers have expressed particular interest in serving the growing industry needs of the country. The entry of multiple global brands may help raise the existing technological know-how in the field here to global standards, and create more employment opportunities in the sector.”
Large urban centers such as Delhi NCR, Mumbai and Bangalore are likely to continue to remain the major hubs for retail distribution centers; while Pune and Chennai are likely to see healthy demand for industrial warehousing. Furthermore, with the implementation of GST, certain locations may witness a spill over in demand due to the sheer cost advantage.
“The Goods and Services Tax (GST) and a thriving e-commerce industry is expected to play a pivotal role in shaping future warehousing trends over forthcoming months. Driven by cost savings, instances of consolidation activity in the warehousing space have already been noted; and this trend is likely to gain further momentum across cities, ” he added.
Sustained demand, coupled with limited quality supply, led to a steep rental appreciation (22–24%) in micro-markets such as Gurgaon / NH-8 and Kundli / Murthal NH-1 (Delhi NCR) when compared to H2 2014. In addition, locations such as Delhi and Chandogar (Ahmedabad) also witnessed rental appreciation of 12–13% over H2 2014.
Additionally, enhanced demand / enquiry levels for warehousing and logistics facilities amid the non-availability of quality supply in various locations in Chennai, Ahmedabad and Kolkata, resulted in rental appreciation of 4–5% (over H2 2014).
However, rental values in locations such as Bhiwandi (Mumbai), North Chennai (Madhavaram, Manali, Redhills) along with Chakan, Sanaswadi and Pimpri (Pune) remained largely stable.
The coming months are likely to witness supply addition across certain areas Delhi NCR and Kolkata. Development activity is likely to pick up in Gujarat as well.
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