85% growth in warehousing space leasing: Knight Frank Warehousing Report 2018

85% growth in warehousing space leasing: Knight Frank Warehousing Report 2018

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The 3rd edition of India Warehousing Market Report 2018 by Knight Frank India indicates positive growth trends across 8 major markets with the warehousing space leasing, recording 85% growth to 25.7 mn sq. ft in 2017 in comparison to 2016. As per the report, the National Capital Region (NCR) attracted the highest footprint in terms of transactions in the warehousing space with leasing of 6.5mn sq.ft followed by Mumbai at 5.2 mn sq. ft. in 2017.

3PL (3rd Party Logistics) and retail accounted for two-third of the share in terms of leasing volumes
Retail eclipsed e-commerce as the third major occupier
The share of the manufacturing sector tapered from 30% to 21% and that of 3PL nearly doubled from 16% to 29%.
Retail more than doubled its share from 9% to 16%, albeit on a smaller base.

More than one out of four (26%) private equity Investments in the Indian real estate sector between January 2014 and January 2018 went into the warehousing industry
Around USD 3.4 billion (INR 22,100 crore) of institutional capital poured in the warehousing sector between January 2014 and January 2018

Greenfield projects or new developments attracted more than two-third of these investments followed by 27% for acquisition of complete projects

WH Growth image

Balbirsingh Khalsa, National Director – Industrial and Asset Services, Knight Frank India said “Post GST there has been a spike in demand by almost 100% as companies who were till now in a wait and watch mode have now got into execution mode. For the first time we are witnessing consolidation and expansion of warehousing space. This increase in demand from sectors like e-commerce, 3PLs, Consumer Durables, FMCG and Manufacturing to name a few coupled with a requirement for larger sized warehouses has opened up the field for more and more organised players which has led to a demand. We expect the trend to continue and get better in the days to come.”

Warehousing space absorption more than doubles to 6.5 mn sq. ft in NCR in 2017

The annual transaction volumes of warehousing space in the National Capital Region were 6.5 mn sq. ft 2017, the highest across key Indian markets

The transaction volumes recorded a staggering 129% growth over 2016

Large occupiers like Amazon, Safexpress and Decathlon to name a few have committed huge spaces
While the Equity IRR achievable for a development project at the NH – 48 cluster was up to 26% – the second highest pan-India, the investment return in the Ghaziabad cluster was 22%

Most of the warehousing activity is concentrated in the NH-48 cluster and Ghaziabad cluster

Mumbai records 231% YoY growth in warehousing space leasing in 2017

The annual transaction volumes of warehousing space for the Mumbai warehousing market in 2017 was 5.15 mn. This growth was led by e-commerce, big box retailers and 3 PL players

Mumbai recorded the highest year on year growth amongst key Indian markets

Large occupiers like Allcargo Logistics, H&M, Amazon, DHL and Myntra to name a few have committed huge spaces

While the Equity IRR achievable for a development project at the

Bhiwandi warehousing cluster is situated in proximity to the large consumption markets of Mumbai, Thane city and Navi Mumbai. Hence, the warehousing space in Bhiwandi is primarily being taken up to serve consumption demand.

Warehousing space absorption nearly doubled in Bengaluru in 2017

The annual transaction volume of warehousing space in Bengaluru nearly doubled to 2.5 mn sq. ft

The transaction volumes recorded a staggering 91% growth over 2016

Large occupiers like Hitachi, DB Schenker, Pepsico and Volvo to name a few have committed huge spaces

While the Equity IRR achievable for a development project at the Hoskote-Narsapura cluster was up to 18%, the investment return in the Nelamangala-Dabaspete cluster was 12%

Most of the warehousing activity is concentrated on the Nelamangala-Dabaspete cluster, Hoskote-Narsapura cluster

Warehousing space absorption grows by 86% in Ahmedabad

The annual transaction volumes of warehousing space in Ahmedabad rose to 3.3 mn sq. ft in 2017 from 1.7 mn sq. ft. in 2016.

Large occupiers like Flipkart, HUL, Amazon, Godrej and MRF Tyres to name a few have committed huge spaces

Up to 16% equity IRR achievable for a development project at the Aslali-Kheda warehousing belt while for the Changodar-Bagodara belt it can go up to 18%

Most of the warehousing activity is concentrated in the Aslali-Kheda belt, ChangodarBagodara belt and Becharaji-Vithalapur belt

Hyderabad records 68% growth in leasing of warehousing space in 2017

The annual transaction volumes of warehousing space in Hyderabad rose to 2.05 mn sq. ft in 2017

The transaction volumes recorded a significant 68% growth over 2016 courtesy strong warehousing leasing by pharmaceutical, e-commerce and logistics sectors.

Large occupiers like Flipkart, DHL, Delhivery, Nestle to name a few have committed huge spaces

The Equity IRR achievable for a development project at the Jeedimetla – Medchal cluster stood at up to 12%

Most of the warehousing activity is concentrated in the Jeedimetla-Medchal cluster

Chennai records 24% growth in leasing of warehousing space in 2017

The annual transaction volumes of warehousing space in Chennai rose to 2.35 mn sq. ft in 2017

Large occupiers like Apollo, Indev Logistics and Expeditor to name a few have committed huge spaces

The Equity IRR achievable for a development project at the Sriperumbudur-Oragadam warehousing cluster stood at up to 22%

Most of the warehousing activity is concentrated in the Sriperumbudur-Oragadam cluster and NH 5 – Periyapalayam cluster

Pune records 22% growth in leasing of warehousing spaces in 2017

The annual transaction volumes of warehousing space in Pune rose to at 2.45 mn sq. ft in 2017

Large occupiers like IKEA, Mahindra Logistics, Ericsson, Haier and Kawasaki to name a few have committed huge spaces

While the Equity IRR achievable for a development project at the Chakan-Talegaon cluster was up to 28%, the investment return in the Wagholi-Ranjangaon was 22%

Most of the warehousing activity is concentrated in the Chakan-Talegaon belt and Wagholi Ranjangaon belt

Dr. Samantak Das, Chief Economist & National Director- Research, Knight Frank India added, “With so much happening around in terms of the Make in India programme, One Nation One Tax – GST, traction on industrial corridors and the infrastructure status to the logistics sector, warehousing as a real estate constituent would be a real beneficiary in the times to come. Across the top 8 cities in the country, we have seen transaction volumes jump by 85% YoY to 25.7 mn sq ft in 2017. Investors had started taking cognizance of the opportunities in this sector much before the government could implement the reforms. The past few years have witnessed massive participation from institutional investors. Some of them have purchased ready assets, whereas others are investing in a mix of ready and Greenfield assets.”