With a marked increase in warehousing absorption, small cities are now turning into warehouse hubs


With ecommerce moghuls like Amazon, Flipkart, Udaan, Reliance along with third-party logistics firms scaling up operations to meet consumer demand, tier-2 cities are now witnessing a marked increase in warehousing absorption like never before.

Since the onset of the pandemic, more than 15 small cities including Lucknow, Raipur, Bhopal and Vadodara have started seeing a greater warehouse demand. Experts believe that these cities are now witnessing 100,000 to 200,000 sq ft deals compared to 25,000-50,000 sq ft deals signed earlier.

As per the industry projections for the next five years, the ecommerce segment is expected to take up space estimated to be 98 million sq ft, registering an increase of 165% from the preceding period of 2017-2021. Private equity funds are also increasingly looking to invest in secondary cities in the country.

Logistics development platform ESR and Indospace is stepping up investment in the industrial and warehousing space in smaller cities.

“There is huge interest from institutional funds in the warehousing and logistical segment in the country. There is huge demand from ecommerce and 3PL players.”

~Abhijit Malkani, CEO, ESR India.

CapitaLand has also launched its second INR 2,250 crore logistics fund to expand in India’s logistics sector.

“The second fund will increase our geographical footprint as we are looking at tier-2 cities and the size of the facilities will depend on demand. The smaller town locations have to be controlled by the nearby metro hubs.”

~Aloke Bhuniya, CEO, Ascendas-Firstspace

The fund will deploy capital in Coimbatore, Guwahati, Jaipur, Kolkata and Lucknow.

As customers climb the development graph, consumption in tier-2 and 3 cities is increasing due to rise in disposable incomes, higher aspirations and affordability, shared a senior source from JLL.

Credits: ET

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