Structural reforms including the awarding of infrastructure status and the implementation of GST Act, have bolstered demand for logistics and warehousing space in the country. As a result, demand has outstripped the supply according to JLL’s latest report, ‘Indian Logistics and Warehousing: Tracing the Lifecycle’.
The report said that annual demand of around 32 mn sq ft has outstripped the supply of 31 mn sq ft witnessed for the first time in the last four years. With the Jan-March period of 2019 already witnessing 8.4 mn sq ft. of absorption, it is expected to clock approx. 38 mn sq ft by end of 2019. With high demand, lease transactions have remained high, so far. Alongside the rise in transactions, the share of Grade A spaces leases has also gone up in the past four years. Of the total 32 mn sq ft 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, logistics sector is expected to grow to US$ 215 bn by 2020.
- Jan-March period of 2019 witnessed 8.4 mn sq ft of absorption
- Structural reforms and implementation of GST bolstered demand for logistics and warehousing space
- 56% of the total 32 mn sq ft of industrial and logistics leases in 2018 were in Grade A spaces
- Indian logistics and warehousing industry expected to grow to US$ 215 bn by 2020
Yogesh Shevade, Head - Industrial Services, JLL India, said, “There is huge potential in the logistics and warehousing sector. With high demand for high-quality logistics facilities and increasing market maturity, the space is set to grow from this stage. However, it continues to witness challenges on account of problems such as land aggregation, tax parity etc. Hopefully, we will see an easing of these challenges with further reforms.”
These developments has resulted in a regular upward trend in average rents in the past three years, and the trend is expected to continue in the coming years, the report added.
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 mechanized and automated material handling facilities, which will bring in the much-needed efficiency enhancement leading to a reduction of up to 30% in logistics cost. In a well-maintained warehousing facility, technology and planning of maintenance can optimize Common Area Maintenance charges significantly.