October 21, 2021

The World Stock Markets Tips & Targets, News, Views & Updates

The World Stock Markets Tips & Targets, News, Views & Updates

Third party logistics, e-commerce & retail companies driving warehouse demand

Supply additions in I&L sector surpassed 11 MSF in H1 2021, rising by about 5% from H2 2020. Here, Chennai accounted for one-third of the total supply addition, followed by Delhi-NCR (19%) and Mumbai (16%).Supply additions in I&L sector surpassed 11 MSF in H1 2021, rising by about 5% from H2 2020. Here, Chennai accounted for one-third of the total supply addition, followed by Delhi-NCR (19%) and Mumbai (16%).Supply additions in I&L sector surpassed 11 MSF in H1 2021, rising by about 5% from H2 2020. Here, Chennai accounted for one-third of the total supply addition, followed by Delhi-NCR (19%) and Mumbai (16%).

The domestic industrial & logistics (I&L) industry registered healthy 13% half-yearly growth as enterprises leased 14 million sq ft (MSF) in H1 2021, with third party logistics (3PL), e-commerce and retail companies accounting for almost two-third of the space, real estate consultant CBRE said.

“The I&L sector is evolving quickly, driven by continued policy interventions, robust growth in manufacturing and rise of e-commerce and 3PL in recent years. Despite the short-term slowdown post the Covid pandemic, the sector started to bounce back from the first quarter of 2021 and a stronger recovery is expected in H2 2021,” CBRE said.

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3PL, e-commerce and retail players dominated the leasing demand with a contribution of 44%, 14%, 14%, respectively, during H1 2021. Demand contribution by 3PL, e-commerce, and retail players during H2 2020 stood at 37%, 30%, and 4%, respectively, it added.

In terms of markets, Delhi-NCR and Bengaluru dominated the space take-up in warehousing. The two cities together accounted for about 50% of the total leasing during January-June 2021.

Supply additions in I&L sector surpassed 11 MSF in H1 2021, rising by about 5% from H2 2020. Here, Chennai accounted for one-third of the total supply addition, followed by Delhi-NCR (19%) and Mumbai (16%).

Going ahead, CBRE said occupiers are expected to further diversify sourcing and manufacturing bases and maintain certain levels of safety stock. This is likely to lead to a greater usage of warehouse space. To minimise logistics disruptions, occupiers would seek to locate themselves strategically in facilities closer to the final point of consumption.

Occupiers are likely to secure pre- commitments in investment-grade supply and engage developers at the design stage to ensure greater customisation of space, it added.

“Investor focus would be on I&L assets that offer income stability, especially those backed by sustained demand from 3PL and e-commerce firms. Opportunistic assets would remain the key strategy for I&L-focused investors. Select investors who have a presence in tier-I cities may even explore tier-II and -III markets,” the consultant said.

Greenfield acquisitions are likely to remain the prime investment route for I&L-focused investors, mainly via developer-investor partnerships. Select I&L-focused investors may also consider brownfield or portfolio acquisitions, it added.

Warehousing sector expanded significantly after the introduction of the GST, but Covid accelerated its rise as one of India’s sunrise industries. Leasing grew from 35 MSF in 2015-17 to 77 MSF between 2018 and 2020. CBRE projects that warehouse leasing, which witnessed a historic peak of 32 MSF in 2019, is expected to touch nearly 100 MSF by 2023.

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