Uptick In Warehouse Leasing; E-commerce And Third-party Logistics: CBRE Report
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Real estate consulting firm CBRE South Asia Pvt. Ltd on Wednesday announced the findings of its India’s Industrial & Warehousing Sector: Tenacious Amidst The Turning Tide report. Against the backdrop of robust growth of manufacturing, e-commerce, and third-party logistics (3PL) sectors, the report highlights how Industrial and Warehousing (I&W) activity has gained momentum over the past few years in India.
The report delves into the dynamics of the current manufacturing ecosystem in India and its improving prospects as an alternative supply chain destination on account of elements such as favorable demographics, relatively low labor costs, and continued thrust on infrastructure improvement and policy reforms. As a result, the business climate in the country has vastly improved, as is evident from the continued jump in India’s Ease of Doing Business rankings. This, in turn, has had a positive impact on the manufacturing sector of the country, which has attracted over $121 billion in FDI inflows over the past six years.
“Over the past decade, India has consistently aimed at diversifying from a services-based economy to becoming an alternate manufacturing destination in APAC. As a result, the demand in the Indian I&W sector has surged, making it one of the key growth drivers of the real estate industry. With strong government support to ease investment norms through attractive tax sops and policy initiatives, we can expect increased interest from domestic and global manufacturers,” said Anshuman Magazine, chairman, India and South-East Asia, Middle East and Africa, CBRE.
Even before COVID-19, the manufacturing sector was witnessing a visible shift: away from the previously established destinations towards alternative hubs. As a result, India has increasingly become an active player in the global manufacturing supply chain, on the back of improved domestic capabilities in recent years. This has also been supported by robust government initiatives such as Make in India, Aatmanirbhar Bharat, Building India Campaign (through the National Infrastructure Pipeline) as well as policies such as the Production Linked Incentive Scheme, aimed at attracting investments across a diverse mix of industries such as electronics, automotive, pharmaceuticals, textiles, and food processing among others.
The report also described the current warehouse leasing scenario in the country. The warehousing space take-up over the past five years has crossed 100 million square feet cumulatively, with a historic leasing peak of 32 million square feet reached in 2019. 3PL players accounted for more than 40 per cent of the total warehouse leasing in the post-GST period (2018-20), followed by occupiers from the e-commerce (21 per cent) and engineering and manufacturing (11 per cent) sectors. Occupiers across these sectors have started to increasingly prefer large-sized spaces to consolidate operations, especially post the implementation of the GST. Backed by increasing online retail demand amidst the pandemic, e-commerce, and 3PL players are further expected to lead warehouse leasing over the next few years, the report added.
Following a large-scale expansion in tier-I cities, occupiers have also started to expand their footprint in tier-II and tier-III locations due to improvements in infrastructure and the growth of online retail in these areas. Warehouse supply addition over the past five years also crossed 75 million square feet in the country.
In the current scenario, there is a rising demand for an agile supply chain that aims to enable end-to-end control and move from risk mitigation to risk management. As manufacturers focus on increasing CAPEX towards implementing tech in their facility/supply chain, technological advancements such as artificial intelligence (AI), Blockchain, big data and the Internet of Things (IoT) will ensure that the sector stays resilient in the times to come.