Leasing of warehousing space went up by over 45 per cent last year to cross 25 million sq ft in seven major cities, driven by e-commerce sector that accounted for 23 per cent of the total demand, according to property consultant CBRE.
CBRE Tuesday released its report 'Online retail driving realty – Elevating the e-commerce game' that examines the link between online retailing (e-tailing) and the logistics sector and the impact of GST on the leasing of warehousing spaces.
Warehouse leasing crossed the 25 million sq ft mark in 2018 in seven major cities -- Delhi-NCR, Mumbai, Chennai, Kolkata, Hyderabad, Pune and Bengaluru, CBRE said, adding that the demand for better quality space resulted in rents rising by 10-25 per cent last year.
"The impressive growth of the e-commerce sector has been on the back of favourable policy reforms, tech-enhanced warehouses, rising smartphone and internet penetration, digital India movement, amongst others," the report said.
The growth in the e-commerce sector has led to an increase in its share in overall warehousing leasing from 10 per cent in 2017 to 23 per cent in 2018, the consultant said.
"The sector (warehousing and logistics space) has seen unprecedented growth and we expect supply to touch almost 60 million sq ft by the end of 2020," said Anshuman Magazine, Chairman and CEO, India, South East Asia, Middle East, and Africa, CBRE.
Innovative technologies, coupled with viable government reforms such as GST and other global collaborations would further push the envelope of development for the Indian logistics sector, he added.
While the overall warehousing supply (grade A and inferior grade) for the sector is expected to be around 60 million sq ft till 2020 end, at least 22 million sq ft of this supply is estimated to be in the grade A category.
Jasmine Singh, National Head – Industrial and Logistics, CBRE said, “We anticipate warehouse leasing activity to remain vibrant going forward, driven by continued demand from e-tailers, policy impetus and growing demand from tier-II cities."
Modern tech-powered warehouses will be in more demand, he added.
"As the sector evolves, we can expect to see the addition of more variables to the warehousing equation - supply chain modernisation, growing foray of tech and artificial intelligence (AI), optimisation of delivery networks and greater synergy between retail and logistics networks," Singh said.
CBRE said that the increased demand would also pave the way for opportunities such as asset enhancements and redevelopments. Many grade B warehouses located close to cities will undergo redevelopments as per occupier specifications.