Warehouse space leasing grows by 77% YoY in 2018: Knight Frank Report

Warehousing space requirement for manufacturing sector expected to be 68 million sqm in 2019; estimated to reach 86 million sqm by 2024.

Knight Frank, the independent global property consultancy, today launched the latest edition of its flagship report, India Warehousing Market Report 2019 to give perspective on the scale and growth of the warehousing market in India.

According to the report, total warehouse space leasing is estimated to be 68 million sqm (739 million sqft) in 2019 for the manufacturing sector which is projected to grow at a compounded annual growth rate (CAGR) of 5% in the next five years to 86 million sqm (922 million sqft) by 2024.

The report notes that logistics cost in India accounts for 13% – 14% of the Gross Domestic Product (GDP) which is substantially higher than the (8% – 10%) logistics cost to GDP ratio in other developed countries. The primary reason for this is the skewed multi-modal mix and the fact that 60% of freight movement in India happens via roadways.

Shishir Baijal, Chairman & Managing Director, Knight Frank India, said, “The growth of the manufacturing sector has been slated to have the most prominent impact on the Indian Warehousing industry.  Just this sector’s storage requirement forecasted to reach 86 million sqm by 2024, instantly puts the spotlight on scope and growth for developers and investors in the warehousing market.”

He added, “The warehousing segment is in the midst of an evolutionary leap spurred by the new GST regime, technological enhancements and the increasing adoption of third-party logistics providers. The tangible efficiencies brought in by these logistics experts and the substantial growth in institutional investment activity in the warehousing space have seen leasing transactions in this segment grow by a substantial 77% during 2018. Of which, at 128% growth, the e-commerce segment is the fastest growing occupier segment for the Indian warehousing market.”

Balbirsingh Khalsa, National Director, Industrial & Asset Services, Knight Frank India during the launch of India Warehousing Market Report 2019 said, “Exponential demand of large-sized warehousing structures that are legally compliant in for regional warehousing purpose in top 8 cities has driven leasing volumes to grow from 26.1 million sqft to 46.2 million sqft. in last one year. Demand in tier 2 cities is also on the rise and showing big growth potential and combinedly taking demand up to 60 million sqft across India. This growth is adequately funded by substantial growth in investments, giving the required stimulus to develop quality and organised warehousing spaces across India.”

Key Highlights of the India Warehousing Market Report 2019

  • The total requirement of storage space in the Indian manufacturing sector accounts for 80% of the warehousing market today.
  • Top warehousing markets in India witness a growth of 77% year-on-year in warehouse space leasing in April 2018–March 2019.
  • The warehousing industry has witnessed massive participation from institutional investors, as well as developers who have collectively invested over USD 6.8 billion since 2014, with an average investment per deal of USD 282 million.
  • Private Equity funds had a 49% share of the total investments into the warehousing industry. This was followed by sovereign & pension fund at 31% and 20% of the pie belonged to the developers.
  • 83% of the investments in warehousing assets went into new developments whereas 10% went into ready assets and 7% into a combination of ready and under construction assets.
  • The investments committed by institutional investors alone is estimated to create over 15 million sqm (158 million sqft)of new warehousing space over the next few years.
  • Kolkata witnessed the highest year-on-year surge with 191% in warehousing leasing volume over 2017 followed by Bengaluru (147%) and Hyderabad (96%).
  • There are three major warehouse clusters in Mumbai- Bhiwandi, Panvel JNPT. The emerging new infrastructure and the quick access to JNPT from Chirner road via Navi Mumbai – Belapur will drive in more consumption-based demand in near future.
  • Other cities such as Coimbatore, Guwahati, Rajpura, Ludhiana, Nagpur, Lucknow, Visakhapatnam, Bhubaneswar and Siliguri are gaining prominence now in terms of the growing demand for warehousing space.
  • Of the 29 states, only seven have a dedicated policy framework for the logistics industry. A comparative analysis of the existing logistics policies of seven states shows that Haryana is rated the highest based on the benefits for developers as well as to occupiers.
sector wise allocation of warehousing

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