India is well poised to attract global manufacturing demand and has unique advantage of a diverse talent pool and huge local market.
Colliers today released its Asia Pacific Industrial & Logistics Property report. This report details the prospects for the APAC industrial & logistics sector and examines China Plus One strategies and the opportunities for occupiers and owners in industrial property; the options and opportunities in the last mile and cold chain segments of logistics networks; and investment trends in key markets.
India is well poised to attract global manufacturing demand and has unique advantage of a diverse talent pool and huge local market. This advantage coupled with strategic location and robust infrastructure makes it a go-to-destination for companies that are evaluating the China plus one strategy. Automotive, Electronics, Pharma and Renewables sector continue to drive demand across markets in India. The demand is expected to be stable in the next two to three quarters considering the on-going pandemic.
“The growth of e-commerce fuelled by Covid-19 crisis has also led to the spurt in demand for warehouse infrastructure and the companies, today, focus on flexible and resilient supply chain to enable timely delivery/access to customer. Also, the need to be proximate to customer and to enable quick delivery timelines there is a laser focus on augmenting last mile delivery infrastructure. The developers are continuing to add more supply this year and next to cater to growing e-commerce demand across India including major Tier II cities which are now becoming the focus”, said Shyam Arumugam, Senior Director & Head, Industrial & Logistics Services (India) at Colliers.
New manufacturing locations appearing in developed and emerging markets
China is the world’s top manufacturing nation; however, access to new markets, rising costs, risk diversification and tax incentives are leading companies based in China to expand their operations outside that market in so-called China Plus One strategies. Among emerging China Plus One markets, Ho Chi Minh City, Jakarta, Bengaluru and Delhi NCR are attractive for other manufacturing activities. Manufacturing contributes from 15-26% of real GDP in these markets and should grow at over 6.0% p.a. until 2025.
Mumbai and Pune are key industrial hubs. Pune is seeing expansion by automotive groups, engineering, FMCG, 3PL and e-commerce. Anticipating high growth, developers are also acquiring land parcels to develop industrial parks in Pune. On the other hand, Chennai is a key hub due to its port and the presence of global auto majors, while Bengaluru is the commercial centre of the south. Big industrial and logistics developers are boosting their presence in Chennai. Meanwhile, Bengaluru is seeing new warehousing demand.
Varied approaches necessary to participate in fast-growing last mile and cold chain
Over 2019-2024, online grocery sales in APAC should grow 30% p.a., driving demand for the last mile delivery facilities of logistics networks. Colliers advises investors to focus on logistics warehouses on city fringes, while occupiers can leverage the expertise of 3PLs to enter the sector. Demand for cold chain facilities is surging. Occupiers can work with 3PLs to find the right solution to fit their needs, while investors can refit existing assets or build dedicated warehouses as a long-run option. E commerce majors and 3PLs drive demand in Bengaluru while Chennai is seeing growth in renewables and electronics.
Firm outlook for demand growth should drive yields down further in most markets
Colliers anticipates leasing activity in logistics to grow further in 2021, supported by demand from e-commerce and 3PLs. Supply in most cities is limited, so demand is expected to outstrip supply in the short term, notably in the Grade A class. This market situation favours landlords. Rents should also rise across most markets in APAC in 2021.
