3PL, e-commerce, and retail players dominate warehouse leasing demand

The domestic industrial & logistics (I&L) industry have registered a healthy 13% half-yearly growth as enterprises leased 14 million sq ft (MSF) in H1 2021, with third-party logistics (3PL), e-commerce, and retail companies accounting for almost two-thirds of the space, real estate consultant CBRE said.

“The I&L sector is evolving quickly, driven by continued policy interventions, robust growth in manufacturing, and the rise of e-commerce and 3PL in recent years. Despite the short-term slowdown post the Covid pandemic, the sector started to bounce back from the first quarter of 2021 and a stronger recovery is expected in H2 2021,”


During H1 2021 the 3PL, e-commerce, and retail players dominated the leasing demand and contributed 44%, 14%, 14%, respectively. The demand contribution during H2 2020 by 3PL, e-commerce, and retail players stood at 37%, 30%, and 4%, respectively, the firm added.

Delhi-NCR and Bengaluru dominated the space take-up in warehousing and accounted for 50% of the total leasing during January-June 2021.

The Supply additions in the I&L sector in H1 2021 rose by 5% as compared to H2 2020 and surpassed 11 MSF. While Chennai accounted for one-third of the total supply addition, Delhi-NCR and Mumbai accounted for 19% and 16% respectively.

CBRE believes that moving ahead occupiers will further diversify sourcing and manufacturing bases and maintain certain levels of safety stock, leading to greater usage of warehouse space.

It adds, that intending to minimize any kind of logistics disruptions, occupiers are also likely to relocate themselves closer to the final point of consumption.

Furthermore, we are likely to see Occupiers secure pre-commitments in investment-grade supply and engage developers at the design stage to ensure greater customization of space, the consultancy firm said.

“Investor focus would be on I&L assets that offer income stability, especially those backed by sustained demand from 3PL and e-commerce firms. Opportunistic assets would remain the key strategy for I&L-focused investors. Select investors who have a presence in tier-I cities may even explore tier-II and -III markets,” the consultant said.

Further, the firm said, that while greenfield acquisitions are likely to remain the prime investment route for I&L-focused investors, the select I&L-focused investors will consider brownfield or portfolio acquisitions.

The warehousing sector has been significantly expanding ever since the introduction of GST, but Covid further pushed the acceleration of the segment. The leasing grew from 35 MSF in 2015-17 to 77 MSF between 2018 and 2020.

CBRE estimates that warehouse leasing, which witnessed a historic peak of 32 MSF in 2019 will touch nearly 100 MSF by 2023.

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