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E-commerce, 3PL drive up warehousing rentals

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MUMBAI : The demand for warehousing and logistics space, led by the expansion of e-commerce and growth of third-party logistics (3PL) companies, is pushing rentals in this segment.

Rents in key warehousing markets have risen over 5% so far in 2022 as against a compounded annual growth rate (CAGR) of not more than 3% witnessed between 2015 and 2021, showed data from JLL India.

According to industry estimates, e-commerce companies such as Flipkart and Amazon have leased over a quarter of India’s total warehouse capacity in the last two years. This is projected to accelerate further.

“The spurt in demand for warehousing spaces led by 3PL and ecommerce is now being complemented by retailers across industries and across markets,” said Chandranath Dey, head – operations & business development, logistics and industrial, JLL, India. “Inquiries and deal conclusions have surged as they witness recovery in sales in the last few months following the Omicron wave, putting upward pressure on rentals.”

However, according to him, average rentals in Indian warehousing still continue to be much lower than developed and other emerging markets such as Australia and Vietnam, respectively.

Average monthly warehousing rentals for grade A properties are hovering around Rs 21 per sq ft a month and Rs 18 per sq ft for grade B spaces.

Demand is consistent across geographies – in peripheral areas of key consumption centres such as the Mumbai Metropolitan Region (MMR), the Delhi-National Capital Region, Bangalore, Pune and Hyderabad, and also tier-two cities such as Ahmedabad, Lucknow, Chandigarh and Nagpur.

“The warehousing market rentals will be reset for most Indian cities on the lines of commercial real estate where the base rents were rewritten in the past with a bump of 15% considering the shortage of grade A supply and availability of developable land.

The other factors that will contribute toward the increase would be rise in land price, development costs and an upward interest rate trajectory,” said Mehul Shah, CEO, LOGOS India.

Demand is being pushed with the expansion of quick ecommerce services that include delivery commitments within 10 or 30 minutes even as several online retailers build an omnichannel presence for a higher wallet share.

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