We expect continued expansion of 3PL players to drive space take-up

- Jasmine Singh

Senior Executive Director, National Head, Industrial & Logistics Services, CBRE

According to CBRE, how is the demand evolving for more space in the logistics and warehousing operations?

The industrial and logistics (I&L) sector remained resilient despite the continued supply chain disruptions witnessed globally as well as a plateauing of demand from the e-commerce sector. While there was a short-term drop in appetite for new spaces from e-commerce players, we still expect their space take-up to increase over the coming quarters. Focus on operational efficiencies could lead to growth in 'flight-to-quality' leasing. In line with the demand, we anticipate development completions by organised players to increase. We also expect continued expansion of 3PL players to drive space take-up.

Space take-up is expected to remain between 28 and 32 million sq ft led by the continued expansion of 3PL players. Even while e-commerce businesses demand for additional premises has temporarily decreased, we still anticipate that over the upcoming quarters, it will expand. An increase in 'flight-to-quality' leasing might result from a focus on operational efficiency. We predict that development completions by organised players will rise in accordance with demand.

What major constraints do the logistics and warehousing sector face in the country?

Apart from India's continuous power shortage issue, some constraints include land scarcity, expensive land acquisition costs, and a lack of suitable warehousing infrastructure. India needs to streamline the acquisition process, and digitising land records will be essential for building world-class storage facilities.

India is still far from where it needs to be in terms of business convenience. To allow quicker and more efficient business formation and operations, the nation must do away with outdated rules and regulations. For instance, warehouse construction still requires industrial permits. Setting up new warehouses is a labourious procedure that involves several regulatory guidelines with various agencies. A single-window clearance system should be used in place of this strategy, especially when creating last-mile hubs and outlets.

Post Covid, do you see business picking up in the warehousing and logistics segment?

The sector is poised for sustained growth. According to our recent findings, I&L leasing activity reached 6.1 million sq ft in Q2 2022. Moreover, 3.6 million sq ft of supply addition was witnessed in Q2 2022. With a share of 57 per cent, medium- to large-sized deals (more than 50,000 sq ft) dominated leasing activity. Bangalore led absorption with a 25 per cent share, followed by Chennai (21 per cent), Mumbai (15 per cent) and Delhi-NCR (15 per cent). Rental growth is being witnessed in Hyderabad, Bangalore, Pune and Mumbai.

What is your outlook on India's warehousing and logistics market?

One of India's most robust industries is the warehousing and logistics sector. Following the pandemic, the industry has seen an increase in the number of Grade A warehouses, which are essentially massive buildings that enable storage, support effective operations of any business's supply chain, and are created with luxurious facilities, cutting-edge technology, and expertise to deliver competencies. Furthermore, with everyone shifting to the direct-to-consumer model and the need for speedy delivery, on-demand warehousing is essential.

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