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Indian industrial, logistics real estate most durable: JLL

May '20
Pic: Shutterstock
Pic: Shutterstock
As the COVID-19 pandemic has significantly affected businesses and economy worldwide, consumers have shifted consumption activity to online transactions, according to a study by global real estate services firm JLL. The demand for e-commerce and pharmaceutical services has ensured India’s industrial and logistics real estate industry has remained the most resilient asset class in the first quarter of 2020.

India’s warehousing sector—driven by new supply in eight major metros including Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, Delhi National Capital Region and Pune—saw about 15 per cent contraction (in mn sq ft) during the January-March quarter. Net absorptions stood at 5.9 mn sq/ft in the midst of the lockdown across the country starting March 2020, the study found.

“Modest absorption amidst the Covid-19 uncertainties hints that the fundamentals of the industrial and logistics sector is strong and set to take a faster revival route among major real estate asset classes,” Indian media reported quoted Ramesh Nair, chief executive officer and country head, India, JLL, as saying.

The projected supply of speculative spaces may be delayed by a quarter or two, which will also be influenced by factors including protracted labour shortages.

As the impact of the national lockdown becomes clearer, the leases and active request for proposal that were in various stages of closure are likely to be completed in the third and fourth quarters of 2020.

Post-lockdown, demand is likely to be driven by e-commerce and third-party logistics (3PL) players, which will continue to explore urban spaces. Grade A properties will be more attractive to occupiers due to health and safety considerations, the study said.

Pent-up demand and project closures may be pushed by two quarters with an expected spark in activities by fourth quarter. However, the fundamentals of the sector remain strong and the biggest advantage for India remains in the potential to capture manufacturing demand as companies re-position their global supply chains from a business continuity planning standpoint, it found.

The lockdown has frozen supply chains across multiple sectors, both in production and stockpiling. These restrictions have also limited transactions in the growth-oriented e-commerce sector, the report added.

However, after the lockdown, a change in consumer behaviour is expected to benefit e-commerce and e-payments, which is already being observed through movements of essential commodity.

The report highlights that the medium-term will experience an uptake in demand of urban logistics and in-city warehousing. The logistics sector is expected to see long-term growth as e-commerce expands and with enhanced infrastructure support.

Sectors such as fast moving consumer goods , e-commerce, pharmaceuticals and cold storage will see an increased growth and demand for the additional warehousing spaces. On the other hand, a few sectors like auto, heavy machinery and chemicals, may look for short-term rent abetments for one-to-two months.

Fibre2Fashion News Desk (DS)

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