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Fresh Supply of Warehousing Space May Decline by 73% in 2020: Savills India
The projection for warehousing and logistics leasing in India may also decline by 25% this year due to corona pandemic says the research paper from Savills India
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The corona pandemic will have a negative impact on the supply for warehousing space in India in the balance part of 2020. While the fresh supply of warehousing space may see a decline of around 73 per cent, the projection for warehousing and logistics leasing may also see a decline of 25 per cent in 2020 says Savills India’s research paper ‘India Front & Center – Production & Supply Chain’.
Says Arvind Nandan, Head of Research, Savills India: “The depth of eventual economic impact is not easy to ascertain for any segment of the industry at present.”
However, not all is bleak and dark for this key sector, the growth of which shows the health of Indian manufacturing, logistics, and e-commerce sector. The sector could see quick recovery of within 6 months post the pandemic or a moderately quick recovery of up to one year, the report said.
The report says more than 3 million sq. ft. of new contracts were signed across 6 locations by manufacturing and e-commerce clients in last few weeks. “There is a strong pipeline of development for warehousing and logistics space that is underway in the country,” it says.
More than 3000 acres of land acquisition under in various stages of due diligence /closing for the purpose while institutional investment deals of around USD 600 million are currently in progress.
“Despite the ambiguity, it is highly likely that warehousing and industrial sectors will recover stronger than most others in India,” adds Nandan.
According to Savills India’s research paper ‘India Front & Center – Production & Supply Chain’, post the outbreak of the pandemic, projection for warehousing and logistics leasing has been revised to 30 million sqft in 2020 from the previous estimate of 40 million sqft. Similarly, fresh additional supply for warehousing space was previously estimated to be around 45 million sqft this year. It has now been revised to 12 million sqft for this year.Hence, the total stock of warehousing and logistics space in India was previously estimated to be around 250 million sqft in 2020. Post-Covid 19, it has now been revised to 220 million sqft for 2020, it says.
Due to sharp contraction in fresh supply, vacancy in large warehousing spaces is likely to be at 3 per cent. Pre-Covid, vacancy for this year was earlier estimated to be around 10 per cent, it adds.
While demand and supply for warehousing real estate would be shaken as result of pandemic in the near to medium term, recovery for the segment could be quick post the pandemic on the back of a strong inherent demand especially from sectors like eCommerce, 3PL (third party logistics), FMCG (for essential goods / services) and pharmaceuticals. Even during the lock-down, warehousing space requirement for players, especially dealing with essential items have witnessed increased demand - in terms of enquiries and expression of interest.
As per the research paper, more than 3 million sq. ft. of new contracts were signed across 6 locations by manufacturing, 3PL and e-commerce clients in last few weeks. There is a strong pipeline of development for warehousing and logistics space that is underway in the country. More than 3000 acres of land acquisition under in various stages of due diligence /closing for the purpose while institutional investment deals of around USD 600 million are currently in progress.
However, few trends may emerged post Covid19 in the sector as well. Some of the key trends that may come in future include increase use of automation and technology in such spaces, increase diversification with respect to sourcing with greater attention to local sourcing, probable shift to lean supply chain to Ideal Inventory Levels with optimum inventory volumes and business continuity plans that could translate to greater demand among others.