Track2Realty: The logistics and warehousing market in India attracted steady transaction activity, with large sized transactions of around 100,000–250,000 sq. ft. reported during the first half of 2014. The Delhi National Capital Region (NCR), Chennai and Mumbai accounted for the bulk of leasing activity during H1 2014. The automotive, FMCG, commerce, and third party logistics sectors were the principle drivers of demand for warehousing space in the country during the first half of the year, according to the CBRE report, India Logistics MarketView – H1 2014.
With the latest movements in the Indian e-Commerce arena, it was interesting to note increased demand for warehousing and distribution center space from online retailers such as Flipkart, Myntra and Amazon, among others. The emerging retail segment took up approximately 0.6 million sq. ft. of warehousing space across Mumbai, Chennai, Bangalore and Delhi NCR during the first six months of the year.
Commenting on the findings of the report, Anshuman Magazine, Chairman and Managing Director of CBRE, South Asia Pvt. Ltd., said, “Improved economic performance and a sustained expansion in industrial production are likely to generate significant demand for warehousing space across most prominent industrial hubs in the country. Implementation of large scale industrial infrastructure projects, growth in retail and FMCG industries, and other support measures are expected to promote the growth and development of India’s modern logistics and warehousing industry.”
The long awaited implementation of the Goods and Service Tax (GST), along with growth in core sectors is likely to increase demand from key occupiers. It is likely to unlock the potential of micro-markets that fail to attract occupiers because of taxation challenges, apart from attracting professional developers in the logistics and warehousing real estate space in the country.
According to the bi-annual CBRE report, logistics and warehousing demand is likely to remain focused in areas with suitable physical infrastructure and proximity to national highways. The coming months are likely to see new supply of logistics space across the Delhi NCR, Mumbai and Bangalore, which is likely to positively impact transaction activity in the warehousing hubs of these regions.
Additionally, infrastructure initiatives such as the Kundli–Manesar–Palwal (KMP) Expressway near Delhi, the six-lane Outer Ring Road in Chennai, and the formation of logistics parks in Bangalore are all likely to provide the necessary impetus for warehousing activity to take off across these markets in the long run.
Rental values of warehousing spaces appreciated by about 7–12% over that of H2 2013 across industrial stretches of Bangalore, as well as along those of Gurgaon and Ghaziabad in the NCR. This was mainly due to limited supply and enhanced demand for warehousing and logistics facilities in these regions. Moderate demand, coupled with abundant supply at Dankuni, Old Delhi Road in Kolkata, Madhavaram/Redhills in Chennai, and Pimpri/Chinchwad in Pune led to a rental decline of nearly 6–8% during H1 2014.
Anshuman Magazine added, “The new government has proposed several policy measures in the Union Budget 2014–15 towards the upgradation and development of infrastructure in the country, which is likely to provide the necessary support to our warehousing and logistics sector in the long run. In a significant step, it has also approved the formulation of Infrastructure Investment Trusts in India to ensure that long-term financing is available for public–private partnership and other infrastructure projects.”
