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Demand for logistics & warehousing space outstrips supply

Jun '19
Pic: JLL
Pic: JLL
Structural reforms like awarding of infrastructure status and implementation of Goods and Services Act (GST), have bolstered demand for logistics and warehousing space in India. As a result, demand has outstripped supply – annual demand of around 32 mn sq ft has outstripped supply of 31 mn sq ft witnessed for first time in last 4 years, says a latest report.

According to JLL’s report, ‘Indian Logistics and Warehousing: Tracing the Lifecycle’, the January-March period of 2019 has already witnessed 8.4 million sq ft of absorption, and it is expected to clock approximately 38 million sq ft by end of 2019. With high demand, lease transactions have remained high so far. Alongside the rise in transactions, the share of Grade A space leases have also gone up in the past four years. Of the total 32 million sq ft of industrial and logistics leases in 2018, 56 per cent were concluded in Grade A spaces.

Sectors such as 3PL/logistics, engineering, auto and ancillary, e-commerce, FMCG, retail and telecom & white goods have remained the biggest demand drivers. As a result of the high demand, logistics sector is expected to grow to $215 billion by 2020.

“Favourable investment regulations have made the deployment of development funds a lot easier than it used to be in the past. Moreover, the infrastructure status as expected has added strength to the development pace. GST implementation has brought in a uniform tax regime and has removed the challenges relating to logistics supply chain, making it easier for operators in the space to expand across geographies,” said Ramesh Nair, CEO & country head, JLL India.

“There is huge potential in the logistics and warehousing sector. With high demand for high-quality logistics facilities and increasing market maturity, the space is set to grow from this stage. However, development side continues to witness challenges on account of problems such as land aggregation, tax parity etc,” said Yogesh Shevade, head - industrial services, JLL India. “Hopefully, we will be witnessing easing of these challenges with further reforms.”

The liquidity infused by global investors is prompting the market to move towards organised and globally accepted warehousing space – Grade A/globally accepted warehousing space has more than 50 per cent savings on rent per pallet position over Grade B spaces. While in operation, in the future we will see mechanised and automated material handling facilities. These will bring in the much needed efficiency enhancement leading to as much as reduction of upto 30 per cent in logistics cost. In a well-maintained warehousing facility, technology and planning of maintenance can optimise common area maintenance charges significantly.

JLL is a leading professional services firm that specialises in real estate and investment management. (PC)

Fibre2Fashion News Desk – India

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