Warehouse leasing up 45% at 10 mn sq ft in first-half: CBRE

Lease transactions in logistics and warehousing grew 45 per cent in the first half of this year to 10 million sq ft, driven by implementation of GST and grant of infrastructure status to the sector.

The demand was led by e-commerce, third party logistics, retail, and engineering and manufacturing sectors, real estate consulting firm CBRE said today. These sectors together accounted for more than 75 percent of the leasing reported during the period.

This is a result of the policy reforms in the past two years, particularly the implementation of GST, as more and more companies have consolidated their operations and are locating warehouses closer to consumption hubs, driving demand, CBRE said in India Industrial and Logistics Market View, H1 2018.

The average size of the space take-up increased from around 75,000 sq ft during H1 2017 to close to 90,000 sq ft during the first half of this year. The overall demand for logistics and warehousing space was largely concentrated in Bengaluru (25 per cent), Delhi-NCR (21 per cent) and Mumbai (20 per cent). Chennai and Hyderabad also reported sizeable transaction activity and accounted for about 12 per cent and 10 per cent of the demand respectively.

Anshuman Magazine, Chairman, India and South East Asia, CBRE, said, “As the sector witnesses the use of technology, coupled with the government’s reform push, corporates across all sectors would be driven to opt for large, modern warehouses. The entry of various private equity firms and foreign players in the Indian logistics market would boost quality supply, hence propelling demand.”

Cities such as Mumbai, Pune and Chennai would remain major investment destinations, with Delhi-NCR and Bangalore also being on the investors’ radar, he added.

Commenting on the sector, Jasmine Singh, Senior Executive Director – Advisory & Transaction Services, India, CBRE said, “We foresee leasing activity to remain upbeat over the next six months, driven by the 3PL and e-commerce sectors. Initiatives such as the creation of a separate Logistics Department is a reiteration of the government’s focus on the development of the sector. In addition, initiatives such as Make in India and relaxation of FDI norms have had a positive impact on investment sentiment in the country, leading to heightened business activity across the logistics sector.”

The report further said that rentals continued to appreciate along several micro markets across the cities. The micro-markets of NH-6 in Kolkata and Bhiwandi in Mumbai reported the highest appreciation, ranging between 15 per cent and 24 per cent.

Meanwhile, other micro-markets such as NH-2 in Kolkata, the Northern Corridor in Hyderabad, the Southern Corridor in Bangalore, NH-1 in Delhi-NCR and Aslali in Ahmedabad reported a rental appreciation of 3-5 per cent on a half-yearly basis. The increase could be attributed to sustained occupier interest. Further, rentals across all other micro-markets in most of cities remained stable during the review period, except in Chennai’s western belt, which witnessed a marginal 1-3 per cent decline.

On policy measures aiding economic growth, the logistics sector benefitted from the ablation of the short-term pain inflicted by the implementation of the Goods and Services Tax (GST). The implementation of GST has also helped remove inter-state checkpoints and reduced the movement time of cargo, thereby, reducing sources of capital, the report, said. Adding to this, the grant of infrastructure status to the logistics and warehousing sector has also led to increased investor interest as it has helped developers gain access to infrastructure lending on easier terms with enhanced limits.

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