Leasing activity in the logistics and warehousing segment across India registered a half yearly growth of 50 percent during the second half of 2017 and touched 10 million sq ft, signaling that the short-term disruptions caused by the Goods and Services Tax (GST) have abated, according to a report by CBRE South Asia titled ‘India Industrial and Logistics MarketView: H2 2017’.
Demand for logistics and warehousing space was largely concentrated in Bengaluru (39 percent), Delhi-NCR (20 percent) and Chennai (13 percent). The only other city to witness sizable demand was Mumbai (9%). Smaller cities such as Kolkata, Ahmedabad, Hyderabad and Pune, collectively accounted for 19 percent of the demand. During H2, 2017, space take-up was dominated by 3PL, engineering and manufacturing, FMCG and e-commerce companies, it said.
On a half-yearly basis, all cities reported an increase in absorption activity, except Mumbai and Chennai, which saw a marginal drop. During the review period, the average size of space take-up increased from approximately 65,000 sq ft in H1 to approximately 85,000 sq ft in H2 2017. The number of large-sized transactions (those exceeding 200,000 sq ft), grew in number by over 50 percent in the second half of the year.
Anshuman Magazine, Chairman, India and South East Asia, CBRE said, “With the government’s granting infrastructure status, the logistics sector in India is expected to see increased activity in the near future. The implementation of the Goods and Services Tax (GST) will lead to significant structural changes in operation dynamics, with enhanced focus on supply chain efficiencies. This will further enable consolidation of warehouses and entry of credible, pan-India players, consequently enabling increased FDI inflows.”
Commenting on the sector, Jasmine Singh, Executive Director – Advisory & Transaction Services, India, CBRE said, “Going forward, two factors are expected to drive demand across the country: consolidation and expansion by existing players, and the entry of new players. As India’s warehousing sector moves towards a more systematic mode of operation, coupled with the implementation of GST, we expect to see foreign participation in the Indian logistics market as well as increased inflow of institutional funding and more formal sources of capital. With growing demand for better warehouses, we will also see the development of technologically advanced warehouses across the country.”
Additionally, rents across all micro-markets in most cities remained stable during the review period. The only exception were the Southern and Eastern corridors of Hyderabad which witnessed an appreciation of about 4–6 percent owing to sustained demand and regular enquiries from various occupiers.moneycontrol