Post Date : May 16, 2022
Warehousing in India has shown splendid growth over the years, and the COVID-19 pandemic has only accelerated the growth prospects of the segment. The boom in online buying has played an important role in supporting the growth of modern-grade warehousing across cities. And, Bengaluru is no exception. The once warehouse deprived city has seen noteworthy growth and has become a crucial destination to build a presence in the warehousing market of southern India. With this feature, we track the growth of the city’s shining sector, the impact of e-commerce on its growth, areawise analysis of warehousing locations, the government reforms and infrastructural support, and the road ahead.
The hub of India’s IT industryand the capital of India’s southern state of Karnataka, Bengaluru has historically been a warehousing supply starved market, with limited, institutional developer presence in the Grade A space. In quite a contrast, it is now the upcoming warehouse express of the south.
With a volume transaction of 0.23 mn sq.m. in 2018, the demand for warehousing in the city has witnessed a significant uptick on the back of the post-COVID e-com boom.
As per Knight Frank’s Warehousing Report 2021, in a challenging year, the Bengaluru warehousing segment displayed robust performance and underscored the strong fundamentals of the city’s organized warehousing landscape. In FY 2021, Bengaluru sustained a warehousing transaction volume of 0.40 mn sq.m. (4.3 mn sq.ft.), which is at par with FY 2020.
Bengaluru, in the last few years, has become a crucial first step for warehousing and supply chain companies towards building a presence in the southern region. Vivek Juneja, Founder & Managing Director, Varuna Group, citing the reason for the same says, “This is because it is India’s largest e-commerce hub, fourth largest contributor to the national economy and ranked third in FDI inflow.”
THE GOLDEN TICKET OF E-COMMERCE
It is not unknown that the pandemic has brought a paradigm shift in people’s lifestyles, it has indefinitely increased people’s dependency on e-commerce platforms. As a result of that, Bengaluru, playing host to many e-commerce giants, has seen a corresponding demand for warehousing space.
Since the pandemic began, warehousing in Bengaluru caught momentum as more and more e-commerce giants set up offices, while the existing players looked to expand and upgrade to grade warehousing owing to increase online shopping induced by the pandemic. This further brought the emergence of newer trends in warehousing demands and opened promising investment opportunities for institutional investors.
The pandemic led boost in sales of consumer goods greatly benefitted the e-commerce platforms and 3PL. 3PL as per Knight frank’s report accounted for a 27% share of the total warehouse space leased in the region.
“This is largely attributed to a sudden surge in the need for extra storage/warehousing space by many occupiers during the first wave, as the closure of state boundaries required additional facility arrangements for last-mile deliveries, something which proved advantageous for 3PL companies to expand and cater to this new demand wave, the report said.
E-commerce accounted for a 22% share but it is evident that the real pent-up demand from e-commerce giants is yet to translate into new warehousing space take-up, once decision making is fast-tracked.
The existing warehousing market of Bengaluru remained resilient in the face of challenges thrown at it by the pandemic due to strong occupier interest on the back of consumption-led demand from this vast metropolis. The second wave of the pandemic only strengthened this demand and further created a need for Grade A warehousing from online-only brands. Additional warehouse requirements from electronics, FMCG, and FMCD companies continued adding a spur to the grade warehousing market.
Although the real estate segment saw the impact of the pandemic, the warehousing market surely emerged as a standout led by e-commerce and third-party logistic growth. In FY 2021, Retail and FMCG accounted for 5% and 4% of the space consumed respectively, the Knight Frank report suggests, while other sectors accounted for 43% of the total warehousing space consumed in Bengaluru, as some select occupiers leased large-sized facilities.
AREA-WISE ANALYSIS FOR WAREHOUSING ACTIVITY
In the past few years, Bengaluru’s prominent clusters have been attracting developers who are successful in creating large institutionalgrade warehousing facilities. Buoyed by the large-scale demand for Grade A warehouses, many regional players have also intensified efforts to build new and modern facilities.
Expecting a high spurt, developers are seen acquiring land on the outskirts of Bengaluru to develop warehouse spaces. Bommanahalli, Bommasandra, Yelahanka, Nelamangala, and modal logistic parks and other initiatives to seamlessly connect urban transport.
This is an abridged version of the original story that was published in the May edition of the Logistics Insider magazine. To read the complete article, click here.