Warehousing to see strong bounce-back in FY21: Report

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Published: July 3, 2020 7:18 AM

The e-commerce share in the warehousing demand increased to 23% in FY20 from 14% in FY18, the report said.

3PL (third-party logistics) leads in warehousing demand, with a share of 36% in FY20.3PL (third-party logistics) leads in warehousing demand, with a share of 36% in FY20.

Recovery in warehousing is expected to be faster and PE investment flows are likely to resume soon, a Knight Frank report showed.

Warehousing demand in the country grew by 44% CAGR in the last three years, and India has additional warehousing development potential of 193 million sq ft, the report stated.

The currently committed land for warehouse is estimated at 21,163 acre, which has the potential of adding 63% more supply to already existing 307 million sq ft of warehousing stock, the research said.

After the introduction of GST, this asset class received institutional investment commitments of $6.5 billion. PE investment activity in the currently year in warehousing dropped to $57 million with only one deal concluded till May 31, 2020, because of the Covid-19 lockdown. In 2019, around $1,508-million PE investments were made into this sector.

Shishir Baijal, CMD, Knight Frank India, said investors remained optimistic about this sector and fresh investments are likely to pick up soon and the segment would see faster a recovery, given the indispensable nature of this market.

Around 77% of the investments in the sector till now have gone to greenfield/new development projects.

According to the report called ‘India Warehousing Market Report 2020’, there was healthy demand growth in Pune, Mumbai and Ahmedabad in FY20, while NCR saw the largest volume of absorption of warehousing space. Pune recorded highest warehousing leasing activity with a 42% y-o-y growth in FY20 among the top 8 Indian cities. Mumbai remains the fastest growing market in the country.

Baijal said despite the economic slowdown and the pandemic, warehousing market has remained largely resilient, recording growth of 44% CAGR in the last three years. Demand has especially been strong from industries such as 3PL, E-commerce, FMCG and Pharmaceutical, which is expected to continue in FY21, Baijal said. “The warehousing segment has been gaining traction with investors in the last few years due to the potential of India’s domestic consumption and overall GDP growth,” he added.

3PL (third-party logistics) leads in warehousing demand, with a share of 36% in FY20, followed by the e-commerce and manufacturing sectors. E-commerce warehousing demand is growing at 55% CAGR since FY17 and is expected to drive growth in demand for the next few quarters.

The e-commerce share in the warehousing demand increased to 23% in FY20 from 14% in FY18, the report said. E-commerce, FMCG, pharma ad 3PL industries are expected to support demand in FY21.

The report said despite economic slowdown in FY20, Pune warehousing market recorded leasing volumes of 4.91 million square feet ft. Paramvir Singh Paul, branch director – Pune, Knight Frank India said the Pune warehousing market witnessed a phenomenal year in FY20 registering a 42% y-o-y growth and the growth was largely driven by 3PL, e-commerce and manufacturing segments. Pune continues to be an industrial driven city with the manufacturing segments garnering the highest share of transactions at 50% followed by e-commerce, 3PL and Retail.

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