The sector’s growth story remains intact as growing demand from segments like e-commerce, retail and FMCG is leading companies to concentrate on supply chain risk mitigation and resilience, as well as faster last-mile delivery.
Even as Covid and the lockdown shook up the warehousing industry, throwing supply lines into disarray, the sector’s growth story remains intact as growing demand from segments like e-commerce, retail and FMCG is leading companies to concentrate on supply chain risk mitigation and resilience, as well as faster last-mile delivery.
A recent study by consulting firm Praxis Global Alliance said that in pre-Covid times, Grade-A and B warehouse in India grew at 18% CAGR over FY 2018-2020. Going ahead, e-commerce and retail are expected to push demand for Grade-A and B warehouses, which are expected to grow at a much faster pace between FY 2018 and 2025.
It forecasts that demand for Grade-A warehousing is likely to grow at a CAGR of 25% from 107 million sq ft (MSF) to 325 MSF between FY20 to FY25, while demand for Grade-B warehouses will grow at 20% CAGR from 167 MSF to 419 MSF during the period under review.
Praxis Global Alliance’s report projects that warehousing stock for e-commerce is likely to grow from 56 MSF in FY20 to 227 MSF in FY25, while retail warehousing is expected to grow from close to 60 MSF to around 205 MSF during the same period.
Besides, demand from FMCG segment is projected to hit 44 MSG by FY25 from about 17 MSF in FY20.
“FMCG, FMCD, retail, and pharmaceuticals have great potential for investment opportunities like automation in warehouse operations, racking optimisation and growth of full-stack logistics,” the report pointed out.
Praxis Global Alliance SVP (transportation & logistics), Savio Monteiro said, “Grade A warehouses are expected to grow at a CAGR of 25% over the next five years on back of robust demand from e-commerce, retail, FMCG and other sectors. Private equity has evinced significant interest in this sector with huge investments during the pre-Covid period. We expect this trend to continue post-Covid too, as the economy comes back to full steam.”
Praxis Global Alliance domain leader (transportation & logistics) Rahul Mehta explained that key emerging trends in warehousing growth over the next few years across these end-use industries range from warehouse automation, expansion to tier-II cities, racking solutions, full-stack logistics, multi-logistics parks, etc. The seven key industries are e-commerce, retail, FMCG, FMCD, manufacturing & engineering, pharmaceuticals and auto & auto ancillaries.
Logistics solutions major DB Schenker’s CEO (cluster India and Indian sub-continent) Vishal Sharma notes that the sector played a critical role during the nationwide lockdown by continuing the movement of essentials and medicines and will remain at the core of the Covid vaccines process in 2021.
“Additionally, the increase in domestic warehousing and supply chain demand will help businesses to return to pre-Covid levels this year (2021). The expected growth will be fuelled by various factors including strong government support with positive policies that will promote domestic production, development of multimodal logistics parks (MMLPs), progressive infrastructure, increase in adoption of digital technologies such as artificial intelligence, blockchain etc, digitisation of supply chain operations for contactless delivery and development of omni-channels,” he added.
Analysts also point out that India lags behind developed countries in terms of per capita warehouse space, which signifies that the sector has huge growth potential. The report by Praxis puts India’s warehouse space at around 2.4 sq ft per capita, compared to 43 sq ft in Japan, 37 sq ft in US, 20 sq ft in Singapore, 19 sq ft in Australia, 6 sq ft in Honk Kong and 4 sq ft in South Korea.