Sector receives investment of over 200 mn dollars; Bengaluru, followed by NCR and Mumbai, dominated leasing activity
Logistics leasing activity touched 33 million sq ft, increasing by over 30 percent on an annual basis. Bengaluru, NCR and Mumbai accounted for about 60% of the overall space take-up during the year and investments in the sector accounted for more than 200 million dollars, a report has said.
In line with the annual trend, the second half of 2019 recorded leasing activity of about 18 million sq ft of space take-up; an increase of about 20% compared to H1 2019 CBRE South Asia Pvt. Ltd., said the report titled 'India Industrial and Logistics Market View, H2 2019' by CBRE.
Backed by several government policies and reforms, the I&L sector received investment of more than 200 million dollars in 2019, primarily in the form of high-volume deals (50-100 million dollars each). These included the partial buyout of an industrial park in Mumbai and the acquisition of two warehouses in Chennai.
Third party logistics or 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.
Installations and Logistics (I&L) space take-up in 2019 was dominated by small-sized transactions (less than 50,000 sq. ft.), which held a share of about 42 percent. The share of medium-sized transactions (ranging between 50,000 sq. ft. and 1,00,000 sq. ft.) rose from 26% in 2018 to 30 percent in 2019. Large-sized deals (greater than 1,00,000 sq. ft.) accounted for 28% of the leasing activity during 2019. The number of large-sized deal closures in Hyderabad, in particular, doubled in 2019 as compared to 2018.
Supply addition in 2019 crossed 19 million sq. ft, rising by about 78% compared to 2018. About 70 percent of this supply was reported in NCR, Mumbai and Chennai. In H2 2019, about 8 million sq. ft. was completed, mainly in NCR, Chennai and Bangalore.
"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 omni channel retailing," said Anshuman Magazine, Chairman & CEO - India, South East Asia, Middle East & Africa, CBRE.
"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 sector saw leasing activity registering 18 million sq. ft. of space take-up," said Jasmine Singh, Nation Head – Industrial & Logistics Services & Senior Executive Director Advisory & Transactions Services, CBRE South Asia Pvt. Ltd.
Going forward alternate segments such as data centres would see more activity. 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.Exclusive offer: Use code "BUDGET2020" and get Moneycontrol Pro's Subscription for as little as Rs 333/- for the first year.
