Real estate consulting firm CBRE South Asia, in its “India Industrial and Logistics Market View, H2 2019” report shared that India recorded an all-time high leasing activity of 33 million square feet, which was an annual increase of more than 30 percent in 2019.
Bangalore, NCR and Mumbai accounted for about 60% of the overall space take-up during the year. In line with the annual trend, the second half of 2019 also recorded historic leasing activity, with about 18 million sq. ft. of space take-up; an increase of about 20% compared to H1 2019. Bangalore, NCR and Hyderabad accounted for close to 60% of the leasing.
3PL firms accounted for about half of the leasing activity in 2019, an increase from 36% in 2018 to 48% in 2019. They were followed by e-commerce players with a share of about 18% in 2019.
“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 growth recorded in H2 2019 was historic, with leasing activity registering 18 million sq. ft. of space take-up.”
Jasmine Singh, Nation Head – Industrial & Logistics Services & Senior Executive Director Advisory & Transactions Services, CBRE South Asia Pvt. Ltd.
Transaction share break-up:
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%. 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% 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 against 2018.
Investments in 2019: Analysis
With key government policies and reforms in its favour, the I&L sector recorded investments worth more than USD 200 million in 2019, majorly in the form of high-volume deals (USD 50-100 million each).
These included the partial buyout of an industrial park in Mumbai and the acquisition of two warehouses in Chennai.
The report stated that in line with the annual trend, the second half of 2019 also recorded historic leasing activity, with about 18 million square feet of space take-up; an increase of about 20 percent compared to H1 2019.
Region-wise analysis:
Supply addition in 2019 crossed 19 million sq. ft, increasing by 78% as compared to 2018. About 70% 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.
Future Outlook:
I&L leasing will continue to be steered by 3PL firms and e-commerce players, along with retail corporate. However, it is anticipated that 3PL occupiers will turn more cautious about expanding their footprint due to tightening profit margins.
Another possibility is that I&L occupiers across sectors will lease additional space in quality, investment-grade pipeline to be released by leading global players in cities such as NCR, Mumbai and Bangalore.
Increasing global investment in data centres (DCs), especially hyperscale and edge computing will also boost I&L leasing demand. Growing demand for cold storage spaces run by e-grocers and dark kitchens is likely to further augment I&L leasing.
“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.”
Anshuman Magazine, Chairman & CEO – India, South East Asia, Middle East & Africa, CBRE
While rental growth will continue across cities, quality and investment-grade supply will prove to be a game changer for the Indian Logistics and Warehousing sector in the coming days.
