Commercial
Real Estate News
India Logistics Leasing Activity Reaches Record High in 2019

India Logistics Leasing Activity Reaches Record High in 2019


Global commercial real estate consultant CBRE is reporting this week that logistics leasing activity in India reached an historic high of 33 million square feet, increasing by more than 30 percent on an annual basis.

Bangalore, NCR and Mumbai accounted for about 60 percent of the overall space take-up during the year. In line with the annual trend, the second half of 2019 also recorded historic leasing activity, with about 18 million square feet of space take-up; an increase of about 20 percent compared to H1 2019. Bangalore, NCR and Hyderabad accounted for close to 60 percent of the leasing.

Speaking on the report, Anshuman Magazine, Chairman & CEO - India, South East Asia, Middle East & Africa, CBRE said, "To become a USD 5 trillion economy, the government aims at enacting several structural reforms to improve physical connectivity. Further, the implementation of government initiatives such as the National Logistics Policy and the National E-commerce Policy as well as large-scale infrastructure development are expected to promote investment, thereby further improving the overall stock of warehousing space in India. The fundamentals of this sector are strengthening, backed by the recovery of domestic demand, improvement of the manufacturing sector and structural shift towards omnichannel retailing."

3PL firms accounted for about half of the leasing activity in 2019, an increase from 36 percent in 2018 to 48 percent in 2019. They were followed by e-commerce players with a share of about 18 percent in 2019.

I&L space take-up in 2019 was dominated by small-sized transactions (less than 50,000 sq. ft.), which held a share of about 42 percent. The share of medium-sized transactions (ranging between 50,000 sq. ft. and 1,00,000 sq. ft.) rose from 26 percent in 2018 to 30 percent in 2019. Large-sized deals (greater than 1,00,000 sq. ft.) accounted for 28 percent of the leasing activity during 2019. The number of large-sized deal closures in Hyderabad, in particular, doubled in 2019 as compared to 2018.

Supply addition in 2019 crossed 19 million sq. ft, rising by about 78 percent compared to 2018. About 70 percent of this supply was reported in NCR, Mumbai and Chennai. In H2 2019, about 8 million sq. ft. was completed, mainly in NCR, Chennai and Bangalore.

Jasmine Singh, Nation Head - Industrial & Logistics Services & Senior Executive Director Advisory & Transactions Services, CBRE South Asia Pvt. Ltd., said, "The logistics sector in India is experiencing unprecedented structural shifts in the form of automation, leading to the blurring of lines with the retail sector, transformation of supply chains and growing investment. The growth recorded in H2 2019 was historic, with leasing activity registering 18 million sq. ft. of space take-up." He further added, "I&L leasing is expected to continue to be driven by 3PL firms and e-commerce players, along with retail corporates. Going forward, we expect that occupier efforts to improve supply chain efficiencies, growing tech penetration and the shift towards modern, larger warehouses would primarily drive leasing. Increasing demand for timely deliveries and growing logistics costs are also likely to propel occupiers to invest in automation and green initiatives for supply chain management."

Backed by several government policies and reforms, the I&L sector witnessed investment of more than USD 200 million in 2019, primarily in the form of high-volume deals (USD 50-100 million each). These included the partial buyout of an industrial park in Mumbai and the acquisition of two warehouses in Chennai.

India Logistics Market Outlook

  • Sectorial growth to be resilient, driven by the 'flight to quality' sentiment: I&L leasing is expected to continue to be driven by 3PL firms and e-commerce players, along with retail corporates. However, 3PL occupiers are expected to turn more cautious about expanding their footprint due to tightening profit margins. I&L occupiers across sectors are likely to lease additional space in quality, investment-grade pipeline to be released by leading global players in cities such as NCR, Mumbai and Bangalore.
  • Alternate segments to be active: Increasing global investment in data centres (DCs), especially hyperscale and edge computing, is also expected to boost I&L leasing demand. Growing demand for cold storage spaces driven by e-grocers and dark kitchens is likely to further augment I&L leasing.
  • Unwavering influence of location and connectivity: Occupiers would continue to place a strong emphasis on location within cities to reduce delivery timelines and transport costs. They would also continue to consolidate/expand operations within core I&L locations and prefer sites near their consumer bases.
  • Quality, investment-grade supply to be a game changer:  CBRE anticipates that Mumbai, NCR and Bangalore would dominate the upcoming supply in 2020.
  • Rental growth to continue across cities: Rental values would continue to increase, driven by newly released investment-grade assets. Developers are also expected to enhance their service offerings to retain tenants and develop new income streams such as pre-quality checks, customs clearance support and procurement solutions.

 
Sponsored by

Comment with Facebook


Copyright 2010 - 2020 WORLD PROPERTY JOURNAL, INC. All Rights Reserved.

Join 34,000+ real estate professionals worldwide who receive our free weekly newsletter

GO
Advertisement
News Search
Go


Luxury Property Spotlight

Reader Poll

Advertisement
Global Listings Showcase
×
WORLD PROPERTY JOURNAL
 
Free News Alerts
 

Sign up now to receive the latest local & global real estate news in your inbox.

GO