PC: Shekhar Kumar Ghosh
India's logistics sector is poised for a strong 2018, real estate consultancy CBRE said in a new report, the 2018 Asia Pacific Real Estate Market Outlook. Leasing activity jumped 70 per cent to 17 million sq. ft. in 2017, the firm said. Demand for warehousing space is now expected to be 20 million sq. ft. this year with both new and existing occupiers expanding their operations. The Indian logistics sector totals about $260 billion today.
Three highlights from the report:
1. Demand drivers: Third party logistics (3PL), e-commerce, FMCG, retail, engineering and manufacturing companies are driving transaction activity. The report says that the "government's impetus to formalise the sector by granting infrastructure status as well as the implementation of the GST have also propelled investments and supply creation". Bangalore, Delhi-NCR and Mumbai accounted for more than 50 per cent of the warehousing space demand. However, smaller cities are rising in importance - the share of Hyderabad, Chennai, Kolkata and Pune in overall transacted space grew from 25 per cent in 2016 to 49 per cent in 2017.
2. Big and automated: Occupiers now prefer large warehouses that lends themselves better to automation. The report states that the Indian market for warehouse automation is projected to grow 10-12% to $3.49 billion by 2020. "Deployment of IoT would revolutionise operations by creating smart warehouses that improve supply chain efficiencies."
3. Investments: Warehousing is emerging as an attractive asset class for investors and PE players. Joint ventures, mergers and acquisitions are rife. Investor companies include Ascendas-Singbridge, Morgan Stanley, and Warburg Pincus among others. "Leading real estate developers have also initiated land acquisitions across major cities for developing warehousing facilities. They are strengthening the supply pipeline by investing in quality warehousing space. This supply pipeline will start getting operational from mid2018 onwards," the report states.