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Leasing of warehousing, industrial space to rebound strongly post virus crisis, say experts

The demand-supply of industrial and warehousing space is expected to soften as compared to previous estimates in the near to medium term due to coronavirus pandemic, the consultant said.

The leasing of warehousing and industrial space has slowed down because of the nationwide lockdown but demand may rise post-COVID-19 with expected growth in e-commerce and possible shift of manufacturing activities from China to India, according to industry experts.

“Industrial and warehousing is the most resilient segment in India, which is likely to emerge quickest and strongest post-COVID-19,” property consultant Savills India said in a report.

Higher supply contraction could lead to decrease in vacancies and optimum pricing, it added. In its report ‘India Front & Center – Production & Supply Chain’, Savills India has revised its estimates downwards for both absorption and new supply of warehousing and logistics space for 2020.

The projection for warehousing and logistics leasing has been revised to 30 million sq ft from 40 million sq ft earlier.

Fresh supply is now estimated at 12 million sq ft this year from 42 million sq ft projected earlier across top eight cities — Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai and Pune.

When contacted, Embassy Industrial Parks CEO Aditya Virwani said, “Both logistics and industrial requirements will see an increase post-COVID. The digital shift to online retail has been a success during these times and that will result in e-commerce firms growing in India.” Embassy Industrial Parks has facilities in Maharashtra, Tamil Nadu, Telangana and Delhi-NCR. On industrial space, Virwani, who is also COO of Embassy Group, said: “India has not been able to compete with China and other Asian countries with manufacturing investments. Now is the opportunity to capitalise on the fear of setting up in China.”

With the right support of the government, Virwani said the industrial space can see a boom. “Our existing clients are holding off on growth in China and looking for new markets.” Rajesh Jaggi, vice chairman – real estate, Everstone Group, said the warehousing segment is considered as an essential service and has therefore largely not been affected due to the lockdown. Everstone group-backed IndoSpace is into development of logistic and industrial parks. “Leasing activity is expected to be slower in this period as companies will focus on maintaining efficiencies of their manufacturing and supply chain processes, instead of new procurement.

“While we have not experienced significant change in demand due to COVID-19, the timelines to close a contract may differ under current circumstances,” he said.

Once the lockdown period is over and manufacturing picks up, Jaggi expects that sectors like pharmaceuticals, e-commerce and food industries would ramp up their storage capacities in line with the demand. IndoSpace is adhering to all safety and hygiene norms at its various facilities, he added. According to Savills India, the recovery for the segment could be quick post the pandemic on the back of strong inherent demand, especially from sectors like e-commerce, 3PL (third party logistics), FMCG (for essential goods/services) and pharmaceuticals.

“Even during the lockdown, warehousing space requirements for players, especially dealing with essential items have witnessed increased demand – in terms of enquiries and expression of interest,” the consultant said.

As per the research report, more than 3 million sq ft of new contracts were signed across six locations by manufacturing, 3PL and e-commerce clients in the last few weeks.

“There is a strong pipeline of development for warehousing and logistics space that is underway in the country. More than 3,000 acres of land acquisition under various stages of due diligence /closing for the purpose while institutional investment deals of around USD 600 million are currently in progress,” the report said.


May 10, 2020

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