Demand for Logistics & Warehousing Space Outstrips Supply
Structural reforms including the awarding of infrastructure status and the implementation of Goods and Services Act, have bolstered the demand for logistics and warehousing space in the country. As a result, demand has outstripped the supply according to JLL’s latest report, Indian Logistics and Warehousing: Tracing the Lifecycle, released today.
The report said that annual demand of around 32 mnsqft has outstripped the supply of 31 mnsqft witnessed for the first time in last four years. With January-March period of 2019 has already witnessing 8.4 mnsq ft. of absorption, it is expected to clock approx. 38 mnsqft by end of 2019. With high demand, lease transactions have remained high so far, it added. Alongside the rise in transactions, the share of Grade A spaces leases have also gone up in the past four years, it said. Of the total 32 mnsqft of industrial and logistics leases in 2018, 56% were concluded in Grade A spaces.
Sectors such as 3PL/logistics, engineering, auto & 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 US$ 215 bn by 2020.
Ramesh Nair, CEO & Country Head, JLL India said, “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.”
YogeshShevade, Head – Industrial Services, JLL India said, “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.”
“Hopefully, we will witnessing easing of these challenges with further reforms,” Shevade added.
The sector, as a result of these developments, has witnessed a regular upward trend in average rents in the past three years. The trend is expected to continue in coming years, the report added.