Coronavirus Lockdown: Warehousing space supply set to drop 44% in 2020

The development of Grade-A warehousing space is set to drop 44% across major cities during 2020. The new addition of warehousing space is expected to be around 12 million sq. feet by the end of this year.

The decline in warehousing space creation is on account of a delay in the completion of ongoing projects across major cities including Bengaluru.

The project completion is held up due to labour shortage arising from the COVID-19 crisis.

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It is estimated that around 50% of the planned supply for 2020 is expected to be deferred to the next year. In 2020, approximately 25 million sq. feet of Grade-A warehousing supply was scheduled to enter the market.

“New supply will be restricted for a few quarters on account of delay in project completion due to labour shortage”, Shrinivas Rao, CEO, APAC, Vestian Global Workspace Solutions told DH.

While the warehousing sector has been on a growth trajectory for the last few years, the current lockdown due to pandemic has slackened the growth. However, this is temporary, as fundamentals remain the strongest amongst other asset classes in India. In the last few months, inter-state lockdown had negatively impacted supply chains with restrictions on the transport of critical components of production, he said.

The supply of Grade-A warehousing space has been growing at a healthy double-digit over the last couple of years. The country witnessed a growth of 13% in the supply of new warehousing space in 2019 at 21.5 million sq. feet compared to 19 million sq. feet in 2018. The growth in the supply of warehousing space was led by ecommerce, FMCG and retail sectors.

“Consumers have shifted consumption activity to online transactions. This has further led to the growth of the ecommerce sector, not only in Tier-I cities but also in Tier-II cities. Due to the lockdown, panic buying has been on the higher side which has increased requirement for home delivery services,” Rao said.

Post-lockdown, demand is likely to be driven by FMCG, ecommerce, and 3PL players who will continue to explore urban spaces, thereby creating demand for in-city warehousing, he added.

With a number of companies deliberating on moving out of China, India expects to have a competitive share in attracting these companies, primarily on account of proactive government policies, abundant labour resource and land benefits.