Warehousing Leasing - What does it hold in Indian scenario
Indian warehouse leasing
sector is on the cusp of experiencing unparalleled growth in the overall Indian
economic landscape, seldom visible in other sectors. Largely driven by online
e-commerce boom, positive technological disruptions and favourable governmental
policy reforms, the warehousing construction and leasing market is fast
becoming a major peripheral sector indispensable to contribute towards positive
user experience. No wonder, developers don't want to lose out on this high
yielding asset, and are tying up with global investors to capture a foothold in
this exciting market. The magnitude of the sector's growth can be gauged from
the fact that leasing of warehouses increased by a whopping 31% year-on-year in
8 major cities in first 6 months of 2019 alone, according to CBRE.
The race to acquire huge land
spaces to build and maintain massive warehousing
spaces is a phenomenon largely fuelled by technological advancements,
with user demand and contemporary business models triggering demand for high
quality spacious warehouses. This is a sunrise sector which even big
conglomerates like Amazon invests in heavily, with 50 Fulfillment centres
spanning 20 million cubic feet across India, only slated to grow more. Such
built-to-suit facilities are only going to flourish more with commensurate
growth in e-commerce model and B2C model implemented on full throttle only
slated to grow. Roll out of government schemes which promote indigenous
manufacturing and development have contributed towards building and leasing
modern warehousing facilities.
Nondescript locations lying at
major cities outskirts have started embracing business value propagation all
year round, thanks to the warehouse leasing model adopted by corporates. Big
international players like Warburg Pincus, Blackstone have evinced interest
through investments to the tune of $10 billion. Knight Frank’s report ’India’s
Warehousing Market 2019’ is a testament to the burgeoning demand for
warehousing establishments, and the huge demand supply gap. According to three
report, FY 2018-19 witnessed a 77% surge
in warehouse space leasing demand, majority of which sourced from e-commerce,
retail and manufacturing sectors.
An interesting feature is the
development of large size warehousing facilities in Tier 2 cities as
well. In addition to economic powerhouses like Delhi-NCR, Bengaluru, Hyderabad,
cities like Ludhiana, Nagpur and Lucknow are now home to huge warehouses which
are leased to corporates. Consolidation and expansion by occupiers has been
cited as the reason for such exponential growth. Development of dedicated
freight corridors spanning across the country has led to the establishment of
modern warehouses, en route critical highway lanes connecting mega cities. This
growth is further assisted by transformation in supply chain value and larger
investments. This is likely to remain high on investor’s radar with private
equity and infra firms expanding their realty portfolios to maintain
high-quality warehousing facilities.
Insatiable consumer demand
combined with competitive business model of same-day delivery has made it
imperative for corporates to adopt decentralised warehousing facilities,
optimally located at arterial locations. Leased facilities are advantageous in
economic sense too, especially with the introduction of GST, which subsumes a
number of state levies thus bringing down the total cost of maintaining
warehouses. In all, warehouses have become vital pillars of the supply chain
in literally every business model, and it is an absolute intelligent business
sense to lease spaces rather than owning them.
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