(Image courtesy: Embassy Industrial Parks)
Industrial and warehousing space absorption is expected to grow by 83 percent to 47.7 million sq ft in 2021, driven by a robust growth in e-commerce and manufacturing sectors as well as rising demand in emerging Tier I and II cities, global property consultancy firm Savills India has said.
The 3PL, or the third-party logistics, and e-commerce sectors continued to drive warehousing demand, accounting for 60 percent of the total absorption in 2020 followed by the manufacturing sector at 24 percent.
“Growing demand for cold chain, pharmaceutical warehouses as well as growth in ecommerce and organised retail are likely to drive warehousing demand in 2021," said Srinivas N, Managing Director, Industrial and Logistics, Savills India.
In addition, strong macro-economic fundamentals and the government’s policy support in implementation would continue to fuel growth for the entire sub-asset class of industrial and logistics, he said.
The growing numbers of firms in 3PL and e-commerce sectors and the huge Indian consumption market have whipped up the investment prospects of India’s warehouse sector. In 2020, the industrial and warehousing market witnessed investments in excess of 1 billion dollars.
NCR leads with the maximum absorption
Among the major cities in India, NCR led with the highest absorption in 2020 at 25 percent followed by Pune at 15 percent. Mumbai and Chennai saw absorption at 13 percent each while Kolkata stood at 12 percent.
Tier-II cities such as Ludhiana, Lucknow, Coimbatore, Jaipur, Guwahati, Bhubaneswar, Nagpur and Patna witnessed around 3 mn sq ft in 2020. These cities are likely to gain momentum in 2021 with ecommerce and 3PL firms capitalising on consumption-driven growth and pushing the demand for warehousing space, the report said.
On the supply side, Savills India expects a 113 percent increase in supply to 47.9 million sq ft in 2021.
Despite construction activities getting affected due to the lockdown, the Top 8 cities of India witnessed a fresh supply of 22.4 mn sq ft in 20202. NCR accounted for 22 percent of the supply, Chennai 20 percent and Bengaluru 12 percent.
The overall industrial and warehousing space stock is expected to increase by 21 percent at 278 mn sq ft in 2021 compared to 230 mn sq ft in the previous year.
Warehousing vacancies have also decreased by 170 basis points from 10.2 percent in 2019 to 8.5 percent in 2020 and rental values remained stable in 2020 across the major cities.
“India is emerging as an alternate manufacturing investment destination. Foreign manufacturing companies are planning to shift their manufacturing base to India. This would lead to an increased demand for both ready high spec fitted out and custom-built industrial spaces across India particularly from growing sectors such as FMCG, energy, automobile, electronics, pharmaceutical, medical devices among others,” said Srinivas.
Moving ahead, improved specifications and strong compliance will set the pace and lead to the growth of the industrial and allied sectors.
Diverse investment opportunities and growing interest in developing infrastructure around integrated industrial townships, highways, ports, inland waterways, inland container depots and free trade and warehousing zones will boost the sector. Automation and manpower will steer disruptions in the years ahead, the report said.