De­cod­ing ware­hous­ing Boom in Bhi­wandi and Pan­vel

Sky-high land price in Mumbai makes it un­vi­able for ware­hous­ing. This makes the near­est pock­ets Bhi­wandi and Pan­vel the most suit­able al­ter­na­tives to serve the mega city, but is the boom sus­tain­able?

Maritime Gateway - - Contents - Sisir Prad­han

Sky-high land price in Mumbai makes it un­vi­able for ware­hous­ing. This makes the near­est pock­ets Bhi­wandi and Pan­vel the most suit­able al­ter­na­tives to serve the mega city, but is the boom sus­tain­able?

If you are an avid on­line shop­per then there are great chances that you must have come across the name of Bhi­wandi while keep­ing a track of your ship­ment. Not just ecom­merce, Bhi­wandi is also a vi­tal cord in the sup­ply chain net­work for bunch of con­sumer goods com­pa­nies. Pan­vel is an­other name that closely matches Bhi­wandi as far as lo­gis­tics and sup­ply chain busi­ness is con­cerned. Lo­cated closer to the fi­nan­cial cap­i­tal of In­dia, and the ad­van­tage of hav­ing ac­cess to a very well con­nected high­way net­work and one of In­dia’s big­gest con­tainer ports at Nhava Sheva, Bhi­wandi and Pan­vel have the ad­van­tage that rarely any other ware­hous­ing and dis­tri­bu­tion hub in In­dia can match. Apart from strate­gic location, while both the places have very lu­cra­tive real es­tate rates that at­tract the ware­hous­ing boom at these places but over a pe­riod of time the prices have shot up and now it is dot­ted with a large num­ber of ware­houses. With the im­ple­men­ta­tion of two ma­jor re­forms in the form of GST fol­lowed by e-way bill, in­vest­ments in lo­gis­tics sec­tor is on a never seen be­fore growth curve, and Bhi­wandi and Pan­vel are now get­ting stiff com­pe­ti­tion from places like Pune, to re­tain its po­si­tion as the top cargo ful­fill­ment hub.

Ad­van­tages

One of the big­gest fac­tors which works in favour of these two sub­urbs of Mumbai is prox­im­ity to Nhava Sheva. Since the port acts as a gate­way for more than 60 per cent of im­ports in the coun­try, most of the com­pa­nies pre­fer to set up their ware­hous­ing hub in and around the area. High­light­ing the ad­van­tages for the cargo hubs,

Ryan Oliver, Busi­ness Head – Con­tract Lo­gis­tics, Agility ex­plains that due to its close prox­im­ity to the port, Pan­vel pre­dom­i­nantly be­came more sought af­ter for a CFS ware­hous­ing model busi­ness with frag­mented Do­mes­tic Tar­iff Area (DTA) dis­tri­bu­tion cen­ters. Over the last 15-20 years, with in­creas­ing de­mand and lower cost of real es­tate, the fo­cus grad­u­ally shifted to Bhi­wandi for DTA move­ments and ware­house con­sol­i­da­tion.

Be­ing the fourth most pop­u­lous city in the world and the fi­nan­cial nerve cen­tre of In­dia, Mumbai is a key mar­ket for the suc­cess of com­pany that wants to make a strong foot print in In­dia. How­ever, at the same time real es­tate price in Mumbai is one of the high­est not in In­dia but it is at par with any metropoli­tan in the west. In such a sce­nario it is dif­fi­cult to ac­quire large land parcels in Mumbai to serve the re­gion. As a re­sult, Bhi­wandi grad­u­ally grew as the most suit­able location to serve as the ware­hous­ing and dis­tri­bu­tion hub. Grad­u­ally due to avail­abil­ity of land parcels, com­pet­i­tive cost of

con­struc­tion and lower cost of la­bor al­lowed de­vel­op­ers to cre­ate ware­hous­ing fa­cil­i­ties.

Apart from the hard in­fra­struc­ture there are a set of eco-sys­tems which helped Bhi­wandi ware­hous­ing sec­tor to grow by leaps and bound. Vikas Anand, Man­ag­ing Direc­tor, DHL stresses that Bhi­wandi has very less issues re­lated to in­dus­trial re­la­tion and other fac­tors like labour un­rest. Lo­cal farm­ers in the area have come for­ward to en­ter into joint ven­tures with ware­house builders, un­like other lo­ca­tions. Ware­house rentals are also com­pet­i­tive in Bhi­wandi and there is a vast op­tion to choose from due to high avail­abil­ity. Due to this rea­son sev­eral in­vest­ment com­pa­nies have in­vested in the Bhi­wandi belt.

Will the growth mo­men­tum con­tinue!

Cus­tomers are very sen­si­tive to rentals, thus ware­hous­ing clus­ters that are in a po­si­tion to of­fer af­ford­able space would en­joy a com­pet­i­tive ad­van­tage over others. Gau­tam Dem­bla, Direc­tor, Spear Lo­gis­tics

ob­serves that with ware­house rentals in the range of `14-22 per sqft/month in Bhi­wandi, rentals are sig­nif­i­cantly at­trac­tive in com­par­i­son to com­pet­ing ware­hous­ing hubs like Pan­vel, that com­mands higher rentals of `20-28 per sqft/month.

Due to huge spurt of de­mand in Bhi­wandi post-gst, there was short­age of large ready to move in ware­houses, how­ever as a large quan­tum of land is avail­able on Nashik road, rentals will con­tinue to re­main af­ford­able for clients who are ready to wait. How­ever, iden­ti­fy­ing ware­house with a clear land ti­tle is a big chal­lenge in Bhi­wandi. On ac­count of tiny and scat­tered land hold­ings in the hands of sev­eral vil­lagers, iden­ti­fy­ing a con­tigu­ous land par­cel of the rel­e­vant size for ware­house de­vel­op­ment is a chal­lenge.

Due to in­flow of new en­trants the real es­tate prices at Bhi­wandi and Pan­vel have shot up how­ever, the de­mand for ware­hous­ing space at these lo­ca­tions have not sub­dued. Ex­plain­ing the rea­son for the steady de­mand, An­shul Sing­hal, CEO and Direc­tor, Em­bassy In­dus­trial Parks

ex­plains that dis­place­ment de­mand is very strong in Bhi­wandi re­gion, due to clients mov­ing away from Grade C non-com­pli­ant sheds to le­gal Grade A ware­houses. Bhi­wandi and Pan­vel have his­tor­i­cally been served by non-com­pli­ant in­di­vid­ual sheds of­fer­ing low spec­i­fi­ca­tions. There is mas­sive de­mand for Grade A and legally com­pli­ant world class ware­houses. Dis­place­ment de­mand is cou­pled by in­creas­ing con­sump­tion in Mumbai Metropoli­tan re­gion. This is cre­at­ing mas­sive de­mand from E-com­merce and FMCG com­pa­nies for ad­di­tional ware­hous­ing spa­ces.

With the in­creased need for ware­hous­ing at Bhi­wandi and Pan­vel, there is rise in em­ploy­ment and the re­sul­tant de­mand for res­i­den­tial com­plexes which has fu­elled real es­tate price rise. The huge gap be­tween cus­tomer low price ex­pec­ta­tions and the high cost of rentals borne by ser­vice providers, has driven mar­gins down and makes busi­ness chal­leng­ing and some­times un­sus­tain­able for most op­er­a­tors at this junc­ture.

The Way For­ward

In­dus­try in­sid­ers be­lieve that the ware­hous­ing mar­ket of Bhi­wandi and Pan­vel will con­tinue to grow in the fu­ture as well. Chan­der Agar­wal, MD, TCIEXPRESS

ob­serves that Bhi­wandi apart from the in­fra­struc­ture de­vel­op­ments like the pro­posed sixlane Trans Har­bour Link con­nect­ing South Mumbai to Nhava Sheva, the up­com­ing new In­ter­na­tional Air­port in Ulwe, the Mumbai In­te­grated SEZ at Khopate in Uran, and ex­pan­sion of JNPT will com­bine and fuel the ex­press lo­gis­tics’ do­main in these ar­eas.

How­ever, in­dus­tries such as FMCG and Pharma, af­ter­mar­ket sales etc whose USP is near­ness to cus­tomer, con­tinue to face the dilemma of ei­ther con­tin­u­ing with their ex­ist­ing larger ware­house net­work or opt for con­sol­i­da­tion. Since the con­sol­i­da­tion of ware­houses has a di­rect impact on longer lead times to reach point of sale and con­sump­tion, as well as a sub­stan­tial in­crease in trans­porta­tion costs.

A ma­jor­ity of the ware­hous­ing re­quire­ment comes from man­u­fac­tur­ing sec­tor is ful­filled by cap­tive space, ei­ther in terms of space at the man­u­fac­turer’s plant or com­pany-owned ware­houses. In con­trast, the con­sump­tion-led ware­house re­quire­ment is close to ur­ban ag­glom­er­a­tions and thus in leased premises close to such ur­ban cen­tres. Projects like the pro­posed Mumbai-nag­pur ex­press­way will fur­ther fuel next wave of ware­hous­ing projects in Bhi­wandi. Cur­rently, the ex­ist­ing high­way is be­com­ing a choke point though. Apart from the ac­ces­si­bil­ity be­ing an ad­van­tage, Bhi­wandi and Pan­vel also of­fer af­ford­able land and labour, which also con­trib­utes in the ef­fi­ciency by which the ware­houses op­er­ate in.

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