Tier II, III cities emerging as preferred Warehousing Hubs: experts

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In-city warehousing has taken a plunge due to the ongoing lockdown, with tier II and III locations emerging as preferred warehousing hubs and investment destinations, industry experts opine.

Mainly focused in Tier I cities, particularly the major eight metros, the warehousing sector had started shifting to tier II locations after certain policy initiatives, according to the industry experts.

“Due to various reasons of urbanisation, warehousing has been more focused in the top eight metros. Later, due to certain policy initiatives, some of the tier-II cities also emerged as preferred locations. However, with lockdown being a national reality now, with the movement of people becoming restricted, smaller cities or the hinterland of the country could be the mini warehousing hubs or focal points,” stated property consultant Savills India Head of Research Arvind Nandan.

Due to the ongoing pandemic crisis, the supply of new warehousing space in 2020 has been estimated to dip to as low as merely 12 million sq ft, as against the previous estimate of 45 million sq ft.; however in the long-term, the demand for warehousing space will grow significantly and there may be capacity addition in almost 30-35 new tier II and III cities, he added.

The government had imposed a nationwide lockdown on March 24 to restrict the spread of coronavirus, allowing movement of only essential services.

However, at present the centre has eased restrictions in non-hospot zones and issued guidelines for strict adherence to social distancing norms.

Also, with migrant workers returning to their native places,the demand for products and services in those areas is also expected to increase, which will further create a market for having warehousing in these locations, underlined experts.

Due to the inter-state lockdown, supply chains of multiple sectors, both in production as well as stock piling have frozen.

“Restrictions on airfreight have also reduced movement of critical components of production for various industries globally. These restrictions have also limited transactions in the growth oriented e-commerce sector. Post lockdown, a change in consumer behaviour is expected towards e-commerce and e-payments. Urban logistics or in-city warehousing will gain traction due to higher penetration of groceries e-commerce.”

~Chandranath Dey, JLL India’s Head Industrial Operations

E-commerce and third-party logistics will primarily drive the demand for warehousing followed by pharma, engineering and manufacturing, among others, according to experts.

“Today, fast delivery is a crucial requirement for the seamless omnichannel strategy of e-commerce players. The fallout of the coronavirus pandemic can exceed the current lockdown and social distancing may become the new normal, at least over the mid-term. In such a market environment, retailers will be under pressure to secure warehousing locations close to their customer base,” Anarock Property Vice-Chairman Santhosh Kumar said.

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