Bangalore, NCR and Mumbai accounted for about 60% of the overall space take-up during the year.
By: Our Correspondent
February 13, 2020: Real estate consulting firm, CBRE South Asia, today released it’s India warehousing market report which registered a leasing activity of 33 million square feet, an annual increase of more than 30 percent in 2019.
Jasmine Singh, nation head – Industrial & Logistics Services & senior executive director-Advisory & Transactions Services, CBRE South Asia said “The logistics sector in India is experiencing unprecedented structural shifts in the form of automation, leading to the blurring of lines with the retail sector, transformation of supply chains and growing investment. The growth recorded in H2 2019 was historic, with leasing activity registering 18 million square feet of space take-up.”
Investments in 2019
Backed by several government policies and reforms, the I&L sector witnessed investment of more than USD 200 million in 2019, primarily in the form of high-volume deals (USD 50-100 million each). These included the partial buyout of an industrial park in Mumbai and the acquisition of two warehouses in Chennai.
Half-year share
The report named ‘India Industrial and Logistics Market View, H2 2019’ stated that ‘in line with the annual trend, the second half of 2019 also recorded historic leasing activity, with about 18 million square feet of space take-up; an increase of about 20 percent compared to H1 2019.
Geographic share
Bangalore, NCR and Hyderabad accounted for close to 60 percent of the leasing in H2, while Bangalore, NCR and Mumbai accounted for about 60 percent of the overall space take-up during the year.
Supply addition in 2019 crossed 19 million sq. ft, rising by about 78 percent compared to 2018. About 70 percent of this supply was reported in NCR, Mumbai and Chennai. In H2 2019, about 8 million square feet was completed, mainly in NCR, Chennai and Bangalore.
Segment share
3PL firms accounted for about half of the leasing activity in 2019, an increase from 36 percent in 2018 to 48 percent in 2019. They were followed by e-commerce players with a share of about 18 percent in 2019.
“I&L leasing is expected to continue to be driven by 3PL firms and e-commerce players, along with retail corporates. Going forward, we expect that occupier efforts to improve supply chain efficiencies, growing tech penetration and the shift towards modern, larger warehouses would primarily drive leasing. Increasing demand for timely deliveries and growing logistics costs are also likely to propel occupiers to invest in automation and green initiatives for supply chain management,” said Jasmine.
Transaction-size share
I&L space take-up in 2019 was dominated by small-sized transactions (less than 50,000 square feet), which held a share of about 42 percent. The share of medium-sized transactions (ranging between 50,000 square feet and 1,00,000 square feet) rose from 26 percent in 2018 to 30 percent in 2019. Large-sized deals (greater than 1,00,000 square feet) accounted for 28 percent of the leasing activity during 2019. The number of large-sized deal closures in Hyderabad, in particular, doubled in 2019 as compared to 2018.
Anshuman Magazine, chairman & CEO – India, South East Asia, Middle East & Africa, CBRE said, “To become a $5 trillion economy, the government aims at enacting several structural reforms to improve physical connectivity. Further, the implementation of government initiatives such as the National Logistics Policy and the National E-commerce Policy as well as large-scale infrastructure development are expected to promote investment, thereby further improving the overall stock of warehousing space in India. The fundamentals of this sector are strengthening, backed by the recovery of domestic demand, improvement of the manufacturing sector and structural shift towards omnichannel retailing.”
Warehousing trends in India
Quality
I&L leasing is expected to continue to be driven by 3PL firms and e-commerce players, along with retail corporates. However, 3PL occupiers are expected to turn more cautious about expanding their footprint due to tightening profit margins. I&L occupiers across sectors are likely to lease additional space in quality, investment-grade pipeline to be released by leading global players in cities such as NCR, Mumbai and Bangalore.
Cold storage
Increasing global investment in data centres (DCs), especially hyperscale and edge computing, is also expected to boost I&L leasing demand. Growing demand for cold storage spaces driven by e-grocers and dark kitchens is likely to further augment I&L leasing.
Cities
Occupiers would continue to place a strong emphasis on location within cities to reduce delivery timelines and transport costs. They would also continue to consolidate/expand operations within core I&L locations and prefer sites near their consumer bases.
Mumbai, NCR and Bangalore
CBRE anticipates that Mumbai, NCR and Bangalore would dominate the upcoming supply in 2020.
Integrated solutions
Rental values would continue to increase, driven by newly released investment-grade assets. Developers are also expected to enhance their service offerings to retain tenants and develop new income streams such as pre-quality checks, customs clearance support and procurement solutions.
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