Leasing of warehousing spaces by automobile companies have declined by more than half during the first nine months of this calendar year due to slowdown in the auto sector, property consultant JLL India's CEO and Country Head Ramesh Nair said on October 29.
As automobile manufacturers prefer to go for government land, part suppliers and dealers which lease warehouses have become cautious in renting logistics space.
"The slow down in auto sector has some rippling effect in warehouse leasing of late. The share of auto and ancillary industries in overall leasing went down to 3 percent in first three quarters of 2019 from 10 percent during the same period of 2018. " Nair told PTI.
The absorption has halved in absolute value during the same period, he added.
"Warehouse leasing from the sector is dominated by ancillary players, while OEMs (original equipment manufacturers) prefer to go for government land. Ancillary players having long term plans have become cautious and we expect the leasing to witness uptick only after a few quarters," Nair said.
According to JLL data, total warehousing leasing stood at 24.1 million square feet during January-September out of which share of auto and ancillary was only 3 percent. In the corresponding 2018, the total warehouse leasing was 16.7 million square feet with auto and ancillary accounting for 10 percent.
The automobile industry has been going trough a prolonged slump with passenger vehicle (PV) wholesales in India witnessing decline for the 11th consecutive month in September when sales dropped by 23.69 percent to 2,23,317 units, down from 2,92,660 units in the year-ago period.
In the April-September period this fiscal PV sales declined by 23.56 percent at 13,33,251 units as against 17,44,279 units in the year-ago period.
Overall vehicles sales in the first half of the fiscal were also down 17.08 percent at 1,17,36,976 units as compared to 1,41,54,463 units in the corresponding period last fiscal.
Major automobile manufacturers including Maruti Suzuki India, Tata Motors, Mahindra & Mahindra, have undertaken production cuts in the wake of the slowdown.
JLL, however, expects the overall warehousing leasing higher this year driven by e-commerce and third-partry logistics players.
In the first nine months of 2019, e-commerce players increased their share to 21 percent from 20 percent in the year-ago period.Similarly, third-party logistics segment's share stood at 44 percent, a sharp jump from 28 percent in the same period last year.