Logistics and warehouse space leasing hits record in 2018, crosses 24 million sq ft: CBRE report

By: | Published: February 22, 2019 12:28 AM

The overall space take-up in the logistics and warehousing sector in the country crossed the 24 million sq ft mark in calendar year 2018, registering an annual growth of more than 40%, which is an all-time high, real estate consultancy CBRE said in a report.

Logistics and warehouse space leasing hits record in 2018, crosses 24 million sq ft: CBRE reportLogistics and warehouse space leasing hits record in 2018, crosses 24 million sq ft: CBRE report

The overall space take-up in the logistics and warehousing sector in the country crossed the 24 million sq ft mark in calendar year 2018, registering an annual growth of more than 40%, which is an all-time high, real estate consultancy CBRE said in a report.

The report said implementation of the GST has led to far reaching implications on industries, more so in the warehousing and logistics sector.

The report said Mumbai dominated the leasing market with 21% share last year, followed by the Delhi NCR at 20%, Chennai (16%) and Bangalore at 15%. Together these cities accounted for more than 70% of the space take-up. The second half of 2018 witnessed robust leasing activity with about 14.3 million sq ft being taken up.

CBRE chairman and CEO (India, South East Asia, Middle East and Africa) Anshuman Magazine said, “With technology permeating the logistics sector, coupled with the government’s push to the sector, corporates will be driven to opt for large, modern warehouses as they would seek to leverage the new GST regime as well as consolidate and expand their operations. This demand, we feel, would further be boosted by entry of various private equity firms and foreign players.”

A top executive with a leading third party logistics (3PL) services provider said one noticeable impact of the GST on warehousing is that it has allowed companies to explore various other distribution models as against the traditional carrying and forwarding distributor-based model.

Under the indirect tax regime, on account of various taxes, companies had to set up warehouses in almost every state, but with a uniform indirect tax structure under the GST, small warehouses are being downsized and companies are investing in larger ones at central locations to service neighbouring areas. The GST has led to more efficient and larger warehouses that offer economies of scale and better floor space utilisation, Magazine said.

CBRE said the number of large sized deals (more than 100,000 sq ft) has almost doubled in last year compared to 2017. GST implementation, coupled with quality supply from reputed developers, resulted in the average size of deals increasing from 75,000 sq ft in 2017 to about 90,000 sq ft in 2018. Similarly, second half of 2018 witnessed about 28% of the leasing in the large sized transactions of more than 100,000 sq ft.

Commenting on the sector, CBRE’s senior executive director (advisory and transaction services, India) Jasmine Singh said, “We foresee Indian e-commerce companies, 3PL players and online grocery chains to increasingly use innovative tech solutions to improve inventory management. The sector is also likely to observe increased levels of institutional funding and more formal sources of capital as private equity firms and developers are already showing interest to acquire land parcels across various locations.”

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