‘GST to have a positive impact on warehousing’
BUILDING BLOCKS Bengaluru leads the way followed by National Capital Region and Chennai, says latest study
CBRE South Asia Pvt. Ltd, India’s leading real estate consulting firm announced the findings of its latest India Industrial and Logistics MarketView report.
According to the report, the implementation of the Goods and Services tax across India is having a positive impact on the warehousing segment.
Approximately 7.3 million sq. ft. of Industrial and warehousing space was leased in the first half of , 2017 across key cities in India; a 50% increase from the second half of 2016.
The demand for logistics and warehousing space was primarily concentrated in Bangalore (24%), Delhi NC R (21%) and Chennai (20%) indicating that the southern cities led leasing activity during the review period. Mumbai with a share of 13% was the only other city to witness sizeable transaction activity.
Except for Kolkata, and Pune, all other cities recorded an increase in absorption of space during the period. From a sectorial perspective, growth in leasing activity was witnessed from all sectors, except pharmaceutical companies, which leased 20% less space when compared to the second half of 2016.
Anshuman Magazine, Chairman, India and South East Asia, CBRE said, “India’s industrial and warehousing segment has been witnessing increased activity over the past few years on the back of our growing economy. The sustained growth of the segment, coupled with the implementation of the landmark Goods and Services Tax, will result in efficient supply chains and lower compliance costs; the benefits of which will eventually trickle down to make therefor ma much needed incentive for businesses in India. It will also help in making India’s markets more organized in the long term.”
In the first six months of 2017, 75% of warehousing space was leased by Third Party Logistics Companies (3PL), engineering and Manufacturing and Fast Moving Consumer Goods (FMCG) companies.
The average size of space take-up increased from approximately 50,000 sq. ft. during the second half of 2016 to close to 65,000sq.ft. during the first half of 2017.
Sustained demand, coupled with limited quality supply led to a steep appreciation in rentals (11-13%) in micro-markets like Ghaziabad (NH - 24), Kundli / Murthal NH - 1 (Haryana) in Delhi NC R, Western Corridors of Hyderabad and Bhiwandi in Mumbai. On the other hand, an increase in supply addition in Chen nailed to a downward pressure on rental values, resulting in a decline of about 4-5% in the Western Corridor and 3-4% in the Northern Corridor, on a half yearly comparison. CITY HIGHLIGHTS: NCR Leasing activity almost doubled when compared to 2016 due to strong demand that was primarily driven by 3PL (31%) and FMCG (28%) companies.
Total demand from these two segments increased from 22% during H2 2016 to 67% during the first half of 2017.Rentals witnessed appreciation across key micro-markets during there view period Mumbai Bhiwandi continued to remain the hub of warehousing activity
Demand was driven by 3PL operators accountingfor close to 72% of the total space take-up during there view period. Despite sustained demand levels, limited regulatory approvals and alternate use of land is resulting in limited transaction activity across the Trans Thane Creek (TTC) industrial area. Bengaluru Leasing activity rises 180% as compared to the second half of 2016. Engineering and manufacturing ,3 PL, Retail, E-commerce, FM CG and pharmaceutical firms drove demand during there view period. Chennai Leasing activity increased by about 45% during the first half of 2017, as compared to the second half of 2016. Activity was largely driven by engineering and manufacturing ,3 PL, FMCG and auto ancillary segment corporates looking at expanding their operations in North and West Chen nai micro markets
The city witnessed fresh supply addition to the tune of 1.7 million sq. ft ., encompassing several medium to large scale warehousing developments. Majority of this supply addition was wit- nessed in North Chennai (60%), followed by West Chennai and South Chennai micro-markets. Hyderabad Majority of the leasing activity was concentrated in the Northern and Eastern zones. Demand was led by engineering and manufacturing, FM CG, pharmaceutical san de-commerce players. Kolkata Leasing activity declined marginally during the first half of 2017, as compared to the second half of 2016. Close to 75% of all transactions during the review period were concentrated across the micro-markets of Dhulagarh, Sankrail and Uluberia along NH -6, Occupiers from the engineering and manufacturing, telecommunication and 3 PL sectors were the major occupiers of space. Pune Pune witnessed limited demand for warehousing space. Close to 3,00,000 sq. ft. of Grade A warehousing and industrial space leased by engineering and manufacturing sector companies and 3 PL operators. Investment activity by High Net-worth Individuals and domestic companies for industrially zoned land parcels also witnessed a positive growth, across locations such as Ch a kan, Sanaswadi and Hinjewadi Ahmedabad Demand picked up in the city with approximately 4,25,000 sq. ft. of space leased across locations such as Changodar and Aslali.
In terms of supply, close to 1.5 million sq. ft. of Grade A supply has been launched, as apart of the three developments at Kheda, Naviyani and Vithalpur
As we move into the second half of the year we expect strong leasing momentum to continue across the key cities. Going forward, demand for warehousing space will be driven by engineering and manufacturing companies, retail players and3PLoper- at ors. The G ST, which came into effect on July 1, 2017, is expected to be a game-changer for the warehousing market.
With its implementation, we expect thereto be consolidation of large warehousing firms, entry of reputed developers backed by institutional funding and rise in demand for large mother warehouses. This will result in the emergence of large scale nationwide players. With new technologies coming in, the concept of ‘hub and spoke model’ is likely to gain prominence, driven by operational efficiency and cost reduction. This growth in demand will spur supply of quality warehousing in the future.
GETTY IMAGES From a sectorial perspective, growth in leasing activity was witnessed from all sectors, except pharmaceutical companies, which leased 20% less space when compared to the second half of 2016.