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COVID-19 India update | Industrial leasing in top eight cities at 11 million sq ft in H1 2020

At $195 billion, industrial is now the second largest investment asset class globally, JLL said

The novel coronavirus, or COVID-19, pandemic has had an impact on the country’s logistics sector, with the overall leasing or absorption in top eight cities in India standing at 11 million square feet in the first half of 2020 as against a 12-quarter average or 7.3 mn sq ft. There has also been an additional spike in short-term demand or temporary warehouses with the lease tenure of six to 11 months, a new report by JLL reveals.

Guwahati, Lucknow, Patna, Jaipur, Coimbatore, Rajpura, Indore, Vijayawada, Hosur and Kochi are expected to be the next industrial growth markets, JLL said in a report, titled: The Road Ahead – The Logistics Sector in Asia Pacific.

Occupiers are expected to further embrace technology, innovative solutions, modern processes and digital transformation to meet evolving consumer habits, it said.

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“India logistics sector remain firmly on the radar of investors globally. Recent signs show the market becoming increasingly sophisticated. The inflow of capital into logistics has resulted in more complex transactions and greater participation by both established and new investors into the sector, which we expect to continue in the future as well,” said Ramesh Nair, CEO & Country Head (India), JLL.

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Some key themes expected to gather momentum in the country going forward include:

Pursuit of platform deals: There is an increasing trend towards acquiring logistics platforms rather than individual assets in India including the recent Blackstone–AllCargo and Blackstone-Hiranandani transactions. Investors will increasingly pursue this route to gain captive tenant networks and achieve scale quickly in India.

Rapid institutionalisation: The world’s largest investors are investing more into logistics real estate. Blackstone’s acquisition of the GLP portfolio in the US during the third quarter of 2019 for $18.7 billion is the largest real estate deal in history.

Value upside: While growth in values is likely to slow in coming few years, investors’ confidence in the structural drivers for the logistics sector is expected to remain intact. Capital values are forecasted to stay relatively firm, with modest yield compression expected in some markets across the region.

E-commerce continues to drive a re-imagination of the Indian logistics sector. According to e-Marketer, online retail sales as a proportion of total retail sales stands at 14 percent globally in 2019. India has a huge growth opportunity with the e-commerce penetration rate standing at close to 5 percent, the report added.
First Published on Sep 17, 2020 05:49 pm
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