WAREHOUSING EMERGES AS KEY REAL ESTATE ASSET CLASS

BENGALURU: The Covid-19 crisis has inadvertently created a huge demand for warehousing space, led by online retailers as well as investors looking for an alternative asset class beyond commercial offices and shopping malls.

Even as supply-side disruptions continue with expected delays in construction of warehousing hubs, the sector is set to become a sought-after investment opportunity with the need for high-quality, automated facilities for smooth supply chain processes now more than ever.

“There is a huge interest from investors, who earlier looked at office and retail sectors, to venture into the warehousing space. With e-commerce penetration expected to rise significantly, with physical shopping facing a setback, this will emerge as the new growth sector,” said Chandranath Dey, head-industrial operations and business development, JLL India. As of 2019-end, India had a total warehousing stock of 211 million sq. ft, of which 88 million sq. ft is classified as Grade A space.

Traditionally, third-party logistics (3PL) and manufacturing sectors comprised bulk of the warehousing consumption with e-commerce at the third spot. The trend will likely shift with e-commerce expected to drive demand in the coming quarters, Knight Frank India said in a report on Thursday. The share of online retailers rose to 23% in 2019-20, from 14% in 2018-19 and is set to further surge, the report said.

Dey at JLL India expects the share of e-commerce to rise to about 40% of the total demand, through 3PL firms. The nationwide lockdown has lifted demand for ready warehousing space, ranging from 30,000-50,000 sq. ft, from e-commerce and 3PL firms for up to 9-12 months. Online delivery firms, especially those dealing in groceries and other essentials and faced supply bottlenecks, looked for space for their stocks.